Steel and Aluminium Dues Hurt U.S. Neighbors Most

How will the Trump administration's 25 percent tariffs on all steel and aluminum imports, in effect as of today, affect the United States' trading partners? Model estimates from the Kiel Institute for the World Economy show that the United States will harm all importing countries, at least in the short term, but above all, it will do a disservice to its own economy as well.

The United States' direct neighbors will be significantly affected. Mexico's real GDP is projected to decline by approximately 0.19 percent, while Canada will be hit hardest with a decline of 0.39 percent. Canada's steel and aluminium industry is highly dependent on the United States, making the country particularly vulnerable to tariffs and revealing a weak point in the trade war with the United States. 

For the European Union, the import tariffs will actually only result in a short-term decline in real gross domestic product of about 0.02 percent. According to analysts, only about five percent of total EU exports are affected, of which only a small portion is exported to the United States. Germany is the most afflicted of the EU economies, particularly due to its automotive industry. According to the model estimate, the German economy will shrink by approximately 0.03 percent in the short term due to the tariffs.

Trump's tariff decisions will ultimately also harm the United States. Imports of metals will decrease significantly and become more expensive, which in turn will burden domestic industries. As is usually the case, the price increase is likely to be passed directly on to domestic customers. At the same time, the missing imports must be covered by domestic production, which will reduce exports by an estimated 1.37 percent and thus weaken U.S. foreign trade. The GDP decrease associated with these factors was put at 0.04 percent by researchers.