US President Donald Trump announced on Thursday he would impose tariffs of 25 per cent on imported steel and 10 per cent on aluminium, in a move the administration said would protect US industry, but which critics said would fail to boost jobs and risked stoking a trade war with China.
Trump, speaking after a meeting with US steel and aluminium makers said the duties would be formally announced next week.
“We’re going to build our steel industry back and our aluminium industry back," he said.
News of the tariffs drove the stocks of US domestic steel and aluminium makers sharply higher, but also hit sentiment on Wall Street due to the potential impact of higher costs on consumers.
The move, which came after what one person with direct knowledge of the discussions described as a night of "chaos" in the White House due to frequent switching of positions in the administration, was sharply criticised by some senior Republican legislators.
“Every time you do this, you get a retaliation. Agriculture is the number one target. I think this is terribly counterproductive for the agriculture economy," said Senator Pat Roberts, who chairs the chamber's agriculture committee.
China has already threatened to curb imports of US soybeans in retaliation, while the European Union has said it will consider action as well. China's top trade official Lui He is in Washington for trade talks.
After Trump's statement, AK Steel Holding was up almost 12 per cent, US Steel Corp was up 8 per cent and Nucor rose 3.6 per cent. By contrast, industrial stocks such as Boeing fell, with traders citing tariffs, which would hit manufacturers' costs.
The administration says duties would protect US industry, but critics say they would raise costs for industry and fail to deliver on a campaign pledge to boost domestic jobs.
It had appeared unlikely that Trump would announce the tariffs on Thursday after a night of back and forth inside the administration.
“There was a lot of movement within the past 12, 16 hours,” said the source who had knowledge of the discussions, but who declined to be named due to the sensitivity of the issue.
“It was going to happen. It wasn’t going to happen and then it did happen.”
The administration has also cited national security interests for its action, saying the United States needs domestic supply for its tanks and warships. Contrary to the action announced by Trump on Thursday, the Department of Defense had recommended targeted steel tariffs and a delay in aluminium duties.
Although China only accounts for 2 per cent of US steel imports, its massive industry expansion has helped produce a global glut of steel that has driven down prices.
Trade tensions between the United States and China have risen since Trump took office in 2017 and the administration is also pushing on what it regards as forced technology transfers to China.
Shares of Asian steel producers such as South Korea's POSCO and Nippon Steel fell overnight.
FEW MORE JOBS FROM TARIFFS
While American steelmakers have lost three quarters of their jobs between 1962 and 2005, a major study by the American Economic Association showed that much of this had been due to improved production technology as output per worker rose fivefold.
"Thus, even if trade protection leads to increased domestic production, increases in employment may be far less than many hope," a report from the highly-regarded independent Econofact economist network said last week.
Consumers of steel and aluminium have lobbied hard against the tariffs. Econofact said in its report that two million jobs were in industries that use steel "intensively", including auto parts, household appliances, farm machinery and oil equipment.
Jobs in the consuming industries are concentrated in California, Texas, the Northeastern and Midwestern states that comprise the rust belt and states in the Southeast.
"Across many states, the number of jobs adversely affected in these steel-using industries could far exceed any steel jobs saved," Econofact warned.
"Past experience also shows that unilateral action like Section 232 tariffs will invite retaliation - the Bush-era steel tariffs led many countries to target politically sensitive US exports like Florida oranges and North Carolina textiles."
The news generated immediate reactions from around the world. The European Union said it would react firmly with a proposal within days for WTO-compatible countermeasures, calling the measures a "blatant intervention" to protect US industry.
Mexico's steel industry chamber Canacero also called for immediate and reciprocal measures against the United States if the 25 per cent tariff announced by President Donald Trump apply to Mexico.
Canadian Trade Minister Francois-Philippe Champagne any US tariff or quota imposed on Canada's steel industry would be "unacceptable" and would be felt in both Canada and the United States.