Although the U.S. primarily sources its steel from Canada, Brazil, and Mexico, the policy aims to reduce indirect steel imports associated with China, the world’s largest steel producer.
While direct Chinese steel imports are minimal, Chinese-origin steel can reach the U.S. through third-party countries where it may be reshipped or mislabeled. The U.S., although less dependent on manufacturing than in previous decades, still consumes large amounts of steel and aluminum for various industries, including construction, automotive, and infrastructure.
These tariffs are expected to increase production costs across sectors due to higher prices for both imported and domestic steel. In response, American steel producers may further increase prices, benefiting from reduced competition from lower-cost imports. Historically, the weight and transport costs of steel and aluminum have already given U.S. producers an advantage over importers.
American Importers Shifted Their Steel
The tariff policy, introduced in 2018, initially led to a decrease in steel imports and a temporary boost in domestic production. However, retaliatory tariffs from other countries increased prices for U.S. exports. Many American importers shifted their steel sourcing to Canada, now the top supplier of U.S. steel imports at 23% of the total. China has fallen to 10th place, contributing less than 2%.
Between 2017 and 2019, steel imports dropped by 27% while domestic production rose by only 7.5%, according to the American Iron and Steel Institute. However, this growth was short-lived as both imports and domestic production declined significantly in 2020 due to the COVID-19 pandemic. Current production levels have yet to recover to pre-tariff and pre-pandemic volumes.
The U.S. administration has since sought to close loopholes exploited by some importers, including reclassifying semifinished steel to avoid tariffs. Recently, additional tariffs of 10% were imposed on Chinese imports, prompting China to retaliate with tariffs on specific goods, including metals and electronic components.
Despite these measures, certain trade policies have been eased. The tariff on low-value imports under $800 has been temporarily suspended while a tracking system is being developed. Additionally, tariffs on imports from Mexico and Canada have been paused until at least March 1. The situation remains fluid as U.S. officials continue to evaluate trade policies and enforcement strategies.