Markets were down on Thursday, 1st March 2018, as President Donald Trump announced a new tariff plan for steel and aluminium imports. What should have been good news for the economy instead made investors shudder. The Dow Jones lost more than 500 points, while Nasdaq and S&P 500 were also affected, losing more than 1.5% each.
Though the president said the tariffs were to help the local steel economy, investors fear there will be a retaliation from the country’s major trading partners, particularly China and Europe. Trump announced that there will be a 25 percent tariff on steel imports, and a 10 percent tariff on aluminium. The president’s national security advisers had earlier suggested that some countries be exempt from the tariffs, in order not to sour relationships with key trading partners.
The Business Roundtable had warned the president last month about the impact of the tariff. The fear over a trading war is one they believe will hurt all parties. Beyond the concerns over possible retaliation, there is the anticipation that prices will go up, especially for products that rely on steel and aluminium. Car and plane makers were hit by the news, with shares in General Motors, Boeing and Ford dropping by about 4 percent each.
A third of the steel being used in America annually is imported, while 90 percent of the aluminium used is also from overseas. The effect therefore, will be an increase in production costs, which will then be shifted to the consumers, which will then impact inflation. Steel and aluminium makers were celebrating however, with U.S Steel receiving an 8 percent boost and AK Steel was up by 11 percent. Century Aluminium was also up by 8 percent.