New fears about trade wars pushed stock markets into the red on Thursday after U.S. President Donald Trump said he would slap tariffs on steel and aluminum — moves that many industries say will raise prices and cost jobs.
Trump said he would sign a document to impose a tariff of as much as 25 per cent on all steel imported into the U.S., and 10 per cent on all aluminum.
“We’re going to build our steel industry back and our aluminum industry back,” Trump said at the White House, flanked by executives from companies in both industries.
The men by his side were all smiles at the event, but they were among the only ones welcoming the news.
The Dow Jones Industrial Average plunged almost 600 points or more than two per cent, largely because industrial companies that populate the group of 30 stocks would take a hit from higher steel and aluminum prices.
“Both metals are crucial to the production of cars and trucks sold in America today and would raise the sale prices of those vehicles substantially,” car industry lobby group the American International Automobile Dealers Association said.
Similar tariffs on steel implemented in 2002 under the Bush administration cost the auto sector 200,000 jobs, AIADA said.
Economist Andrew Hunter of Capital Economics wrote that U.S. steel prices have already risen by 20 per cent in the past year, in anticipation of these tariffs coming. “Tariffs actually raise the incentives for these other manufacturers to offshore production to avoid them,” Hunter said.
The beer industry has also come out against the move, since the hundreds of millions of aluminum cans that the industry uses every year now face the prospect of getting 10 per cent more expensive.
When the U.S. Commerce Department recommended tariffs as an option earlier this year, lobby group The Beer Institute — which represents 5,000 breweries in the U.S., employing 2.2 million people — said “draconian tariffs and import restrictions … will increase costs and endanger American jobs.”
The Commerce Department report recommended putting tariffs or quotes on steel and aluminum on national security grounds.
“Aluminum used to make beer cans is not a national security threat,” the group said.
Heavy equipment maker Caterpillar fell two per cent and aerospace giant Boeing gave back four per cent.
Canadian steel company Stelco was down almost four per cent on the TSX. Miner Teck Resources, which produces coal used in the steel industry, was off by two per cent. The TSX as a whole was off by about 100 points, or 0.6 per cent.
Conversely, shares in American steel-making companies jumped up. AK Steel Holding was up almost 12 per cent, U.S. Steel Corp was up eight per cent and Nucor rose 3.6 per cent.