An explanation of the steel and aluminum tariff war in 16 points

The US imposed steel (25%) and aluminum (10%) duties on Europe, Canada and Mexico on May 31, reflecting Trump’s obsession to bring business back to the US and contain the country’s external deficit. He had already presented this idea right from his inaugural address (in French) at the White House, with his view of the world economy as a zero-sum game, meaning each country has to fight tooth-and-nail to get its hands on the biggest slice of the pie. This view is admittedly not helpful in understanding economic and growth momentum, but it is the view we are dealing with here.

Based on steel and aluminum exports to the US, the cost for Canada is very high at around 2 billion, as well as for Mexico (600 million) and the European Union at around 1.7 billion, including close to 400 million for Germany and 150 million for France. These are substantial figures, so they can have an impact on trade with the US.

So in the end, who will come out the winner from this tariff jostling? It is probably a no-win situation. A trade war is a bit like going 15 rounds in heavyweight boxing match…the two fighters make it through, but they are both a mess by the end and run the serious risk of some long-lasting after-effects.

We can raise a number of points:

1 – Announcements made at the start of March and on Thursday May 31 pushed steel prices up, as shown very clearly by the chart below. Continue reading