Trump doubles steel and aluminium tariffs

0:05Hello and welcome to Business Matters here on the BBC World Service with me Rahul Tandon plenty coming up in the program. We're going to talk a lot about steel. We'll talk about tariffs as well. We'll look at the challenges facing the new South Korean president. How will he strike that trade deal with Donald Trump? And do you have too many meetings in your office? We'll be hearing from somebody who'll be telling us what we should be doing about them. We're joined on the program by two guests on opposite sides of the world. We are in the world's two major economies today. We've got Annika Green, Republican political strategist at Reach Global Strategies.

0:43How is life at the moment, Annika? There's so much going on. You keeping up to date with all of it? Mostly, although it is a bit distracting because we are in the perfect weather right now in the D.C. area. It's really this nice. It's this nice in the early spring before it's too hot in summer and then in the fall again. So everybody's outside. Yeah, outside. Leave the radio behind. Turn off the telly. Don't watch the news. Is that what you're doing? That's right. Keep your phone in your pocket. That's quite a good idea. We've also got Andy Xi, independent economist based in Shanghai. Hey, we're British.

1:16We like to talk about the weather. Go on. What's the weather like in Shanghai? Good morning, Rahul. It's sunny today. It's been rain for quite a few, heavy rain for a few days. So it's a nice change. It is a nice change. And Andy, if you ever want to give up being an economist, you could become a weatherman instead. Thank you very much. Thank you very much for that particular update. Right, a new programme and a new tariff is in place. Now, I'm sure many of you remember on Friday when Davina was talking about this, as was Donald Trump when he said he put a 50 % tariff on imported steel. We are going to be imposing a 25 % increase.

1:57We're going to bring it from 25 % to 50 % the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States. Nobody's going to get around that. So what happened on Tuesday? Here's our North of America business. Correspondent Michelle Fleury. You may recall that last Friday, Donald Trump, during a rally at a US steel plant in Pennsylvania where he campaigned during the election run, he announced that he was going to double American tax on steel and aluminium imports from 25 % to 50%. Now he has signed that executive order, making it official, and that goes into effect from tomorrow.

2:42We know that the UK has an exemption. That's going to remain at 25%. Other countries don't. But do you see this as a negotiating point now, that people will come and say, look, OK, strike a deal with us and we'll reduce these tariffs now? And the backdrop to all of this, as you rightly point out, is that there are currently legal challenges to some of his other duties, those Liberation Day tariffs, as they were called, also some of the reciprocal tariffs. So that's sort of making its way through the courts and could be struck down. At the same time, you've got Donald Trump's team continuing to push for trade deals, notably with the EU, but also with India and other countries.

3:21And in fact, they confirmed that they have sort of given countries until tomorrow to put in their best offer. this is all as the deadline rushes, remember, for that pause in 90-day tariffs, which is due to expire on July 8th. Annika, were you surprised when Donald Trump announced the increase in steel tariffs? Some people weren't sure if he'd signed that executive order. He has now done so. So these tariffs coming in in a few hours' time. I was surprised, but I'm wondering if he's looking for an easy win. As some of his other tariffs have been struck down by the court system under the emergency authority that he used to rationalize them, these have not been struck down.

4:05And, you know, steel tariffs were popular when he imposed them in his first term. And it brings, you know, the blue collar workers, it brings continued support from them. And right now, there's shakiness in his support, depending on how you look at it. Andy, I was looking at China's steel production. It's incredible. They're the first country to produce a billion tons of steel in a year. China produces almost 10 times more steel than the next country on the list, which is India. Not a lot of steel goes, Chinese steel is heading into the US. Their steel mainly comes from Canada and Mexico. But were you still surprised at these tariff increases by Donald Trump in this area.

4:5025 % was already there. 50 % did he need to do it? Yeah. Yeah, I... It's hard to understand what Trump is doing because he seems like... I'm not sure he knows what he's doing. Because the US Steel is the only major steel company in the United States. It makes kind of a third grade steel and it doesn't have any investment plan to upgrade and it just raises prices. It has raised the price of three times since the terrafort is introduced. So the net result is just the higher steel price. And I'm not sure re-industrialization is going to happen. Well, let us speak to somebody who thinks it might happen.

5:29You know, US steel now being taken over by Nippon, still still waiting in the formal announcement, but looks like it is going to happen. And they're going to put a lot of money in, Andy. But let's hear from Philip Bell, president of the Washington DC-based Steel Manufacturers Association. They are the largest steel industry association in North America. I believe that the signal that the president is trying to send is that our steel trading partners need to be very serious about their trading relationship with the United States. It is not an entitlement to sell your imported steel here. It's a privilege.

6:02And I think that President Trump is sending a clear signal that you need to understand and appreciate that privilege. You have a quarter of your steel in the US that is imported about that number. This is going to be a problem for car makers. It's going to be a problem for many businesses who are going to see their costs go up rapidly. Well, as a result of the first round of tariffs during the first Trump administration, over 20 billion dollars has been invested to upgrade and modernize and expand domestic steelmaking capacity. So we feel that through our domestic steel producers, we will be able to meet any demand requirements that come up as a result of this.

6:44In terms of being able to meet that demand, yes, that could happen over time, but that could take years. Businesses that we talk to say it's not going to happen quickly enough. Well, a lot of these new projects started as far back as 2020, and many of them are slated to come online starting in the third and fourth quarter of this year. So we think that we will be in good shape. Also, keep in mind, as we speak, many countries are lined up to negotiate with the administration on what their tariff regimes will look like. How many jobs do you think these tariffs are going to create within the US steel industry over the next few years?

7:30I think it's going to create thousands of direct steelmaking jobs and thousand more of indirect jobs involved in the construction, in the engineering and in the process optimization side of our industry. The problem is, though, let's be honest about this. Let's take the example of US steel. You say it's an industry people want to invest in, but you needed a Japanese company to come in and save the most famous steel company in the US. Well, there's no doubt that US Steel has a lot of name recognition and is considered an iconic company. Also, there's no doubt that Nippon Steel is the fourth largest steelmaker in the world with healthy balance sheets and very good steelmaking technology.

8:15And anyone who believes in free markets, and we certainly do believe in that in the United States, feel like that was a situation where that company appears to be going to the highest bidder, an ally of the US, and a company that can acquire it without any antitrust concerns. But if you believe in free markets, it is also true that other countries can produce steel more cheaply than the US, can't they? China can. They can, but it's not based on free market principles. Often steel produced in China is highly subsidized. Most of it is state owned. And then there are all kind of circumvention and invasion schemes that China deals in to get their steel into our country.

8:56Philip Belder, president of the Washington, D.C.-based Steel Manufacturers Association. Andy, the last point that Philip made there, he's not the only person who makes that point. Whenever we speak to European steel makers, they say the same thing. Chinese steel gets dumped in the EU and that's unfair. Well, you know, I know the most efficient steel company in the world. It's a private shaft steel. It's about 200 miles to the north of Shanghai by the Yangtze River. You go there and see. They have created – they have a scale that no other has. But does that come, Andy? This is just a question. Does that come because it's been heavily subsidized?

9:48No, that's a private company. You know, it was a township and village enterprise that was taken over by a family. And there's no doubt that with so many state-owned steel companies around, the government would have subsidized private companies. It's unthinkable. So the people who talk about that, they just kind of blah, blah, blah. They don't know what they're saying. Chinese have done two things. One is the massive scale, and the other is that they have improved efficiency. And I do not, you know, with all these policies that we are seeing, but in the long run, I just don't see anybody else that can compete.

10:39So I don't know how this is going to work out, and maybe tariffs forever. Well, let us see. Who knows? tariffs forever could be something, could be a new era of global trade where we see lots of protectionism in place. It was interesting to hear from Philip Bell, Annika, because you'll know the Rust Belt, those areas that have been devastated, haven't they, as we've seen manufacturing leave those states. And there is a big desire, which is, as you were alluding to before, why some of these tariffs are popular with a lot of people who voted for Donald Trump, to try and bring some of those industries back.

11:14To bring the industries back, but also to level the playing fields. If I can just revisit what we were just talking about with the subsidies, the Center for Strategic Studies estimates, they say that the Organization for Economic Cooperation and Development estimates that China's steel subsidies are more than five times higher than other non-OECD economies and more than 10 times higher than OECD countries. So the manufacturers in Europe who are complaining about this as well, this is, you know, Trump is the person who's trying to do something about it. Maybe it's not the best thing to do, but nobody else is trying to challenge that.

11:50Some of these companies in China, according to this report, operate at a loss because of these subsidies. They don't actually have to be profitable. So how do you compete with that unless it's to say, well, it's fine for you to do that in your country, but you cannot then bring those products over here? Andy? Well, it's just not true. You look at Like I said, the most efficient steel company. I've known this company for over two decades. I visited this company again and again. And they made all the right decisions along the way. And on the state-owned side, Baosteel in the suburb of Shanghai is the most efficient company.

12:31And there are steel companies in the interior of China. They've been kept alive with some subsidies. But they are not really competitive, you see. The most competitive companies in China are on the coast. Huge ports, importing iron ore from all over the world. That's the most efficient way of locating your steel plants. And these steel plants are the most efficient. And you look at the amount of energy they consume. It's the least in the world. You look at how fast they produce steel. It's the fastest in the world. Chinese have the most advanced technology and efficiency in the world. These numbers, you can go to the factory and find out these numbers.

13:19These are easy to measure. It might be difficult for us to get to that factory, but let us leave that side of the argument there for a moment. I think it's one of those where people on differing sides do have differing opinions. The country is most immediately affected by the increased tariffs on steel and aluminium is America's northern neighbour, Canada. Matthew Shoemaker is the mayor of the Canadian city of Saint-Saint-Marie. The city is on the north banks of the St. Mary's River with the identically named city of Saint-Saint-Marie on the opposite bank in Michigan in the United States. He's been telling me how important steel manufacturing is for his city.

13:58For the last 130 to 135 years, It has been a place where we have made steel and that has outlasted, you know, two world wars and the Cold War, all with the help and support, frankly, of our American neighbors just across the river from us because we are bordered on Michigan. So it's been right now very precarious times because of the threat coming from the U.S. presidency. Yeah, and it looks like we've now got a 50 % tariff on steel and aluminium. Your local steel plant, what, employs around 2 ,500 people? What is that going to mean for their futures? Yeah, well, it's the largest single employer in the city, and it is tied to 50 % of the economic base of our community.

14:47So it's not just that it employs a lot of people, it's that all the employees and retirees who are making steel plant wages are able to take their family out to a restaurant or go to a movie. And that is going to come to a halt. And it's going to mean an economic impact, not just directly from the steel plant, which will be massive, but indirectly from all those spinoffs that come from steel plant wages. I presume a lot of the steel from that plant ends up in the US. So what are you going to have to do now to protect some of the workers there? Over half of the steel produced at Algoma goes directly into the U.S.

15:25So one of the things we've been calling on the federal government and the provincial governments here to do is to put a plan in place yesterday to make sure that there is substitute contracts that can be awarded to Canadian steel mills. things like shipbuilding contracts for Canadian defence spending, and to make sure that there are supports for workers in place, like additional employment insurance supports. When you talk to people in that steel plant, they must be worried about layoffs. That's a real possibility now, isn't it? It is. In fact, already from the 25 % tariffs, there's been about 30 layoffs, which, you know, isn't huge, but every job here in this community helps because this is really an industrial city.

16:14Fortunately, ours has survived the ups and downs of the market. But what we don't want to do is turn out like those communities across the Rust Belt in the U.S. that have seen their fates decline along with their steel mills. So we are anxious, if it's probably the right way to put it. We're certainly angry that our largest trading partner, our largest customer has turned their fire against us in a time when there is no threat from our Canadian product going into the U.S. In fact, it supports American jobs in ensuring that they can build things like hot water tanks and lawnmowers and vehicles like Teslas and Ford Broncos that our steel goes into.

16:58So it's a mutually beneficial relationship and one that has been successful for 125, 130 years. You talk there, though, eloquently about the Rust Belt and the loss of jobs there. So you must understand why Donald Trump is putting these tariffs in place because he's trying to protect those jobs, bring jobs back to those areas. Well, we have been in this situation before. And in 2018, when the Trump administration imposed 25 % tariffs on Canadian steel and aluminum, it did create roughly 1 ,000 jobs in steel mills across the U.S., but it lost 75 ,000 jobs at other manufacturing industries across the U.S.

17:42So the net job loss was enormous. You know, while it may have a short-term boost to the American steel industry to make up for that capacity that's lost in Canadian mills, it is going to have an overall detrimental effect to the U.S. economy and people are going to feel the pain there as well. And when you talk to people across the border, because as you said, you are so close, what are those conversations like? It's a fairly Republican district just across the river from us here, but it is also a district that relies heavily on Canadian dollars being spent across the river, as we call it, because there's a river that separates the two of us.

18:23So their economy is suffering enormously in the community across the river, which is also called Sault Ste. Marie, Sault Ste. Marie, Michigan, because Canadians are hurt and aren't going across the river into Michigan to buy their groceries or to go camping for the summer. or enjoy a different style of restaurant that they've got over there. So there is a direct impact on the American economy in northern Michigan from the Trump administration's decisions to attack Canadian steel communities. Fascinating there to hear from Matthew Shoemaker, the mayor of that Canadian city. And Annika, a lot of people will look at the tariffs and think, OK, you want to address a balance with, I know Andy will disagree with this, with China that some say may be subsidizing some of its industries.

19:07But why have such high tariffs on Canada? I think that he wants to, like I said, level the playing field. I think it's notable. I mean, my heart goes out to the mayor, of course. This is hitting his citizens. But it is very notable that metal tariffs on imports from the UK are still at 25 % because they're working out a deal. So I wonder if Canadian leadership was being a little more conciliatory and coming to the White House and saying, OK, let's make a deal, right? Like, let's figure it out. Look at this place, you know, right across the river, bordering Michigan. The two communities are incredibly intertwined.

19:49Let's not have tariffs on our industry and work something out. I think that that is highly possible and could happen. Barring that, maybe they need to apply to be a state. Oh, well, that's not that conversation. We've had that conversation. It doesn't go down well with some Canadian. But Andy raised a really interesting point, Annika, about tariffs. And you say that they're a negotiating tactic. Andy says they could be here for a long time. Do you think we're entering this new era where the US is going to keep putting tariffs in place until it thinks it has a level playing field? And who knows when that might be?

20:25Well, you know, it kind of depends on what happens in the next presidential election in one sense. But let's also look at what the new slang is on Wall Street. It's called taco. Trump always chickens out. And that's annoying him, of course, and annoying the administration. But we've seen he put a slew of tariffs in on everybody in the entire world, and the market reacted, and then he hauled them back, right? He's done – he had 25 percent tariffs on steel and aluminum. I'll say it like an American. And now they're testing. OK, we're going to raise it and kind of see what happens. Right. Does it bring people to the negotiating table?

21:03We you know, he hasn't put higher tariffs on the UK. So we still have that special relationship and they're trying to work it out. But it is I think he likes making deals. So that is how I see it. Like it. But what would cause these tariffs to be indefinite if they actually work? Right. If they're accomplishing something. And that may be what Andy's seeing. Right. A lot of the tariffs that he put in on China were kept by the Biden administration. Well, that is an interesting point as well, because, Andy, the tariffs will be higher under Donald Trump. But let's not forget, President Biden took a pretty harsh, you know, he was also pretty harsh with China as well when it came to China.

21:39This is now official U.S. policy, whether it's Republican or Democrat. Yeah, I think that, no, the first is I think the tariffs probably are here to stay because the U.S. needs to keep some of its industries for national security purposes. And I do not see that the West will become competitive against China in the foreseeable future. It's just that you look at how the factories operate. I don't see that. We're talking about manufacturing here, aren't we? Service sector is different. No, even the service sector, you know, you look at it like the US just banned industrial software export to China.

22:19And the Chinese are developing very rapidly. when Chinese replace them inside China, they become competitive abroad also. So I don't see how this thing is going to work out well for the West. Well, let us see. You know, the US is still the world's biggest economy, bigger than China at the moment. Some of the biggest companies in the world from the US. No doubt that China in areas like AI is catching up pretty fast. We're going to continue the debate after the news.

23:04Welcome back to Business Matters here on the BBC World Service. We have Annika, who is there in the US. We have Andy, who is there in China. We had a fascinating discussion about tariffs and about the new tariffs that have come in. And a question to both of you here, Because I think one of the things that sort of really struck me and also the production team as well here is that we have two really contrasting views here, don't we? We have the Chinese view and we have the U.S. view. And Annika, do you see much sort of compromise possible here? Because, you know, you both have views that have quite distanced from each other, aren't they, in terms of how you think each other's economies are working?

23:44Yes, I think my view maybe is supported a little bit more by the international community. I certainly respect someone saying they're, you know, believing their country is the best, but maybe being the best at everything in every category isn't what everyone else thinks. But that's my view. No, no, that's great. And that's the whole purpose of the program. And, you know, Anika is right there. It's not just the US. Andy, it is other parts of the world as well who say, look at China and say, hey, you're not playing by the rules sometimes. Do you understand that perspective? Rahul, are you talking to me?

24:17Yeah, yeah. No, I think that the narrative that China is a subsidy and overcapacity, it's really popular. Where does it come from then, Andy? Why do so many people say it? No, Janet Yellen came to China a few years ago before putting 100 % of the tariff on Chinese EV. and Janet Yellen started talking like that to justify the 100 % tariff on Chinese EV. The issue is that you look at what the engineers are saying, what the engineers are saying, Chinese auto plants are 50 % more efficient than U.S. auto plants in terms of physical efficiency, just how fast things are moving. Let's now put aside what kind of product it is and the quality.

25:10It's just the physical efficiency. There's such a wide gap. I have simply for the auto workers in the United States, and they have very few auto workers in China because Chinese auto factories are all automatic. So this is kind of a... Yeah, and that is a point, Annika, isn't it? There are some things the Chinese simply are better at doing, aren't they? And if we look at the moment where they're going with EVs, they seem to be able to make them cheaper and better than anybody else. Well, better by what standard? I don't see a lot of Chinese EVs being driven in Europe and in the United States. I mean, we've had this conversation before.

25:48I'm going to be driving German cars. So this is a U.S. versus China issue for me. You know, you can be efficient in making things people don't want to buy. I don't know how, you know, how much of a, you know, credit that is. And that's not even touching on a lot of the advances that have been made from stealing USIP. And that's also an issue that's going to be brought up in the call between President Xi and President Trump. That's one of the reasons that Chinese students are having their visas revoked, because it's been proven that there's a lot of pressure on Chinese students, either on themselves directly when they're studying in the United States or on their families back in China, to basically report back to the CCP.

26:30And that's just, you know, uncomfortable to say, but true. Wow, that's just a correct of view. Americans like to talk like that. So you look at it, it's like the US, Europe puts like 30 % or 40 % of tariff on Chinese EVs. Still, BYD outsold Tesla now in Europe. So these kind of stories are so detached from reality. The problem with the West in general is that The West became more competitive against China only for a little bit over 100 years. China was always the most efficient in producing the world. Okay, the whole Silk Road thing was about selling Chinese products all over the world. You know, you never heard of the stories of other countries selling stuff to China over thousands of years.

27:23So what we are seeing is that we do see Chinese coming back and restoring their efficiency. So how this world should be organized, we need to think about that. It's been a fascinating conversation. Well, now, quick one answer, one word answer from both of you on this one. This call between President Xi and President Trump, is it going to happen, do you think? You know, the fact that it hasn't happened yet, they haven't even spoken since before the inauguration. It doesn't bode well. You know, so hopefully it'll happen. But if it does, what progress will it make? Well, let us see what happens. And Andy, on the Chinese side, you know, Donald Trump's talked a lot about is it going to happen?