DONALD TRUMP´S SUPER BOWL TARIFFS ARE AN ACT OF SELF-HARM / THE ECONOMIST

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Donald Trump’s Super Bowl tariffs are an act of self-harm

Duties on aluminium and steel will throttle American industry and fragment global markets

Last year dozens of countries proposed or introduced new tariffs on steel imports. 

Most aimed the measures at China, which they accused of flooding international markets with cheap metal. 

On February 9th Donald Trump took a different approach: he picked up a scattergun instead of a sniper’s rifle. 

As the president flew to the Super Bowl, he told reporters that he would announce new tariffs of 25% on aluminium and steel imports. 

On February 10th the levies duly arrived.

Mr Trump sees tariffs as a way to incentivise foreign investment in America and boost domestic production. 

“It’s going to mean a lot of businesses are going to be opening in the United States,” Mr Trump said as he signed the order, which invokes domestic security as justification. 

The new tariffs are due to come into effect on March 12th. 

They threaten to punish America’s allies more than its enemies—and will harm America’s own economy.

America imports 25% of the steel it consumes, four-fifths of which is currently free of tariffs under agreements with Canada, Brazil, Mexico and the EU, its biggest suppliers, as well as other countries. 

America also imports 70% of its aluminium, some 60% of which comes tariff-free from Canada. 

Doug Ford, premier of Ontario, a Canadian province, accused Mr Trump of “shifting goalposts”. 

Emmanuel Macron, France’s president, has said he should stop bashing Europe and focus on China.

Mr Trump’s first term offers a guide to what might happen next. 

In 2018 the president set a tariff of 25% on steel and another of 10% on aluminium. 

Within months he had reached deals with most of America’s biggest suppliers and granted exemptions; the Biden administration later agreed to replace some tariffs with quotas. 

Even blunted, the measures encouraged investment in domestic steelmaking, where capacity has risen by 6% since 2018. 

Yet this did not lead to a big boost in production, which remains below levels in 2019, as does the number of people employed by steel mills. 

Last year output of fresh aluminium fell to its lowest this century. 

Even with tariffs, domestic demand simply has not been strong enough to produce a boom.

In principle, there is now room for metal output to grow. 

America’s raw-steel mills are used to 60% or so of capacity (80% is seen as optimum). 

In reality, America will still lack the expertise to produce lots of refined products at home, says Matthew Watkins of CRU, a consultancy. 

Even after Mr Trump’s first tariffs, America continued to import just as many high-value-added products—including packaging steel and seamless tubes, which contain and transport liquids—from Europe as it did before. 

America has few aluminium smelters; building new ones can take years. 

In the interim it will continue to rely on imports.

Domestic producers, which now face less competition, are giddy. 

The share prices of Century Aluminum and Nucor, the country’s largest aluminium- and steelmakers respectively, rose by 10% and 6% the day after Mr Trump’s announcement. 

The tariffs could also provide a fillip to US Steel, an ailing giant whose acquisition by Nippon Steel, a Japanese firm, was blocked by Joe Biden. 

But this will be more than balanced by higher prices for consumers and the fact that industrial buyers of aluminium and steel will face higher costs. 

Ehsan Khoman and Soojin Kim of MUFG, a bank, estimate that a 25% tariff will push up the cost of a tonne of steel imported into America from $755 to over $900, negating a cost advantage that America currently enjoys over Europe. 

Sheltered from competition, domestic producers will face less pressure to keep down prices.

Mr Trump’s tariffs could have even more profound implications for global metal markets. 

Shares in steel firms outside America have fallen since Mr Trump’s 30,000-feet message. 

Many will no doubt try to redirect wares, pushing down prices elsewhere. 

Other countries may erect trade barriers to protect their own industries. 

The resulting glut in aggregate capacity could, in turn, ensure that international prices remain depressed even as protected metals firms grow rustier and greedier. 

In America and elsewhere, Mr Trump’s metals wars will corrode the economy.