11 Consequences of Trump’s Tariffs

US President Donald Trump recently announced a 25 per cent tariff on steel imports and 10 per on aluminium. These tariffs are likely to have drastic repercussions, affecting the economies of many countries. These are the 11 different consequences resulting from President Trump’s import tariffs.

  1. Steel makers are winners as they can essentially charge more for their products. Bluescope Steel (ASX:BSL) has a US arm which could charge more for their products.
  2. Aluminium companies in the US can charge higher prices once the tariffs come into effect. If these companies start to grow then they can potentially create more jobs and hire more US workers.
  3. When Trump announced his tariff on steel and aluminium imports, stocks fell while gold rallied. If a trade war does unfold, then investors will flock to safe havens such as gold.
  4. China has suggested they will start a trade war by retaliating and raising US tariffs on imports. China is a top buyer of US soy beans and half of the US soybeans go to China. As pork is the most popular meat in the country, China uses these soybeans to feed pigs. This will have a negative effect on US soybean farmers as China may choose to trade with other countries such as Brazil to source their soybeans.
  5. US cars will become more expensive as they use imported steel and aluminium. This can cause US car prices to be more expensive than overseas brands which will may affect the jobs of American workers in the automotive industry.
  6. The US oil and gas industry will suffer as they use imported steel for drilling equipment and steel pipelines to build infrastructure.
  7. US exporters will be affected as countries have already suggested they will impose tariffs to the US imports if these steel and aluminium tariffs proceed. The European Commission President Jean – Claud Junker has warned he will put tariffs on American products such as Harley-Davidsons, bourbon, and blue jeans.
  8. Manufacturing firms who rely on importing raw materials will lose out from these tariffs. This is because the price to produce would increase and they may pass these increased prices to consumers. These import tariffs may cause fewer products to be made in the US and this can result in workers in the US manufacturing sector to lose their jobs.
  9. Jobs involved in the production of steel in other countries will be affected. Canada provides 16% of US steel, Brazil 13% and South Korea 10%. These companies will be hit hard by these tariffs and perhaps may need to let go of workers.
  10. The aerospace industry employs about 2.5million US jobs and heavily relies on steel and aluminium imports. As the cost of individual parts increase, it will be passed onto the consumers or cause lower profit margins for companies which will reduce global competitiveness for these US companies.
  11. These tariffs could start a trade war which can slow global economic growth. More expensive steel and aluminium may mean products are more expensive to consumers. As consumers have less money to spend, they will curb their spending which will impact company’s profits. This in affect will cause companies to reduce capital spending hindering company growth.

Lauren Hua is a private client adviser at Fairmont Equities.

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