A.M. Edition for Mar. 12. As American tariffs on imported steel and aluminum take effect, BCG’s Nicole Voigt explains why domestic manufacturers are likely to respond with price hikes on everything from cars to pumps to screws. Plus, the House passes a GOP measure to avert a looming government shutdown. And voters in Greenland elect a party opposed to a U.S. takeover. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the immediate effects of Trump's new tariffs on steel and aluminum?
The measures bear similarity to 25% steel and 10% aluminum tariffs that President Trump embraced in his first term and aims to address what Trump and his team say is an unfair global steel trade in which foreign government subsidies and other trade barriers allow countries to sell steel to American customers cheaper than U.S.-made metals.
So what effect will the new tariffs have on America's trading partners and its domestic manufacturers? Nicole Vogt is a managing director at Boston Consulting Group and the firm's Global Metals co-lead. Nicole, what does this U.S. action mean for steel producers around the world?
Chapter 2: How will Trump's tariffs impact global steel producers?
Yeah, basically the whole world is watching that, yes? I mean, to get some facts and figures here. I mean, the US, I mean, let's stick with steel, has a demand of 90 million tons roughly and imported 25 million tons. And now with the Trump legislation, everything will be under tariffs. And so... You know, what is the impact on that?
And to be honest, short term, the US will most likely be impacted because you cannot change that quickly your production setup than to produce everything locally. And of course, there is a secondary effect with we getting rid of the exemptions or the country exemptions and the company exemptions. We have now a level playing field for all the importers.
So you have not an advantage anymore if you had quotas in the past. So suddenly everybody needs to compete again on landed cost US. And this is why everybody is watching this.
In terms of, I mean, we can look back to Trump's first term for an example of how these similar tariffs went into effect. And you did see a lot of countries end up, as you alluded to, they're getting exclusions or seeing their products put under duty-free quotas. Australia, Brazil, Canada, Mexico, Japan.
South Korea, the EU and the UK, among others, this time around, the White House is saying we're not going to do that. Those were loopholes effectively that let Chinese steel into the US. And assuming that is the case, I'm curious how the global production landscape has for these metals has changed since Trump's first term.
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Chapter 3: What challenges do U.S. manufacturers face due to increased tariffs?
Have they in a way that might alter how these American measures go into effect?
Well, the thing is not a lot changed, actually. So if we look at U.S. steel demand and U.S. imports since Trump's first term, the U.S. built up roughly 20 percent of the capacity. However, imports only declined by 5 percent. So it seems that the U.S. is not able to substitute yet imports. for the imports.
So my hypothesis would be in the future standard quality material like cold rolled or galvanized material could be produced domestically. However, the big question will be what happens to specialty materials such as tin plate, tool steel or some stainless applications. Here we had significant company exemptions, and now it's unclear if US players will build this up, if we will see local capacity.
Of course, this depends on the business case. You need investments, you need time, and most important, new capabilities in your workforce to produce those products.
Chapter 4: Which industries in the U.S. are most affected by the steel price hikes?
As we look to the US, Nicole, which industries would we be most likely to see affected by these tariffs? I know automakers may be one of them. We've already seen them hit by the tariffs on Mexico and Canada. What else is worth watching?
Well, to be honest, I think all downstream steel-intensive good manufacturers, small and medium enterprises like companies who produce pumps and screws. Because the secondary effect is that steel prices go up and we see this already. Just from the announcement to end of last week, steel prices in the US went up more than 25%, whereas in the rest of the world, either stayed stable or in the EU,
rose by 5%. So this means if you are a steel buyer, it doesn't matter whether you consume imports or domestic supply, your prices go up. And this means you are affected by the increased prices.
Chapter 5: How are international trade partners responding to U.S. tariffs?
Nicole Vogt is the Global Metals co-lead at Boston Consulting Group. Nicole, thank you so much for being with us on What's News. Thank you for having me. And we're already hearing from some major U.S. trading partners on their response to these overnight tariffs.
The EU says starting April 1st, it'll place duties on around $28 billion in American products, including bourbon whiskey, boats, and motorcycles, but stressed it was open to negotiation. Australia, meanwhile, isn't retaliating, with its prime minister saying that trade tensions are economic self-harm that'll be paid for by consumers.
Instead, he's pursuing a tariff exemption, which Trump had said he was considering given that Australia trades at a deficit with the U.S. Coming up, Greenlanders reject moves toward a quick independence in the face of Trump's threats to take over the island and Irish officials hope to charm their U.S. counterparts during tax and trade talks at the White House later today.
We've got those stories and more after the break. Well, tariffs aside, a key economic data point could move markets today. The February Consumer Price Index, which will reveal whether Fed officials and the Trump administration have been able to turn the tide on inflation.
Chapter 6: What economic indicators should we watch in light of new trade tensions?
Ahead of those figures, WSJ's Take on the Week co-host Telus Demos asked Morgan Stanley's chief global economist Seth Carpenter where we are in the fight against price pressures. and what that could mean for the Fed's rate trajectory.
Remember, inflation is the change in prices. It's not the level of prices. And this is another place where I think eggheaded professional economists like me often talk past real people, right? Because we're talking about inflation. Inflation's coming down. Everything's getting a lot better. But prices are still rising. And so that's what people are noticing maybe.
Exactly.
Not only are prices still rising, people still remember what the price of milk was from 2019. And we're well above that. And so I think there's a little bit of a disconnect. And it's probably largely the economist profession's fault that we're not clear. But the Fed is going to be thinking about inflation and asking, OK, with all the available information, does it look like the trend is down? Yeah.
I think they're going to read the data as saying yes to that. And they'll probably lower their policy rate one more time this year, probably in June, maybe in May. Not at the upcoming media march.
And to hear that full conversation, check out the latest episode of WSJ's Take on the Week, wherever you get your podcasts. Returning to Washington, House Republicans have narrowly passed a proposal to fund the government into the fall, setting up a fight to get the measure passed in the Senate ahead of a Friday deadline and avert a government shutdown.
Republicans said their funding plan would clear the way for the GOP to move ahead with President Trump's agenda of tax cuts, spending reductions, and border security, which they're hoping to pass into law later this year.
They'll need Democratic support to advance this week's spending bill, but Democrats have painted the proposal as an effort by Republicans to hand more congressional power over federal spending to Trump and Elon Musk rather than continuing with bipartisan negotiations. And one of the things potentially on the line in the congressional budget is Medicaid.
The program is mainly for low-income Americans, but deep cuts could affect state budgets and health care more broadly. And we want to know what questions you have. Send a voice memo to WNPOD at WSJ.com or leave a voicemail with your name and location at 212-416-4328. And we just might use it on the show.
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