Fun Fact: Valentine’s Day will likely squeak past tariffs this year as most chocolate imports come from Mexico and Canada (tariffs delayed), most flower imports come from Colombia (tariffs narrowly avoided), and many other gifts from China were stored ahead of 10-percent tariffs imposed on February 4.

Everyone Gets a Steel and Aluminum Tariff! 

What’s Happening: On February 10, President Trump issued an executive order to impose 25-percent tariffs on all imports of steel and aluminum starting on March 12, citing Section 232 of the Trade Expansion Act of 1962. Section 232 allows the president to implement tariffs or other trade restrictions on imports with national security implications, and was used on these same products during Trump’s first term. These new tariffs differ, however, in that they raise the tariff rate on aluminum from the previous 10 percent and both steel and aluminum imports will face tariffs no matter the country of origin, meaning that exemptions for Canada, Mexico, Argentina, Brazil, South Korea, Australia, the European Union, Japan, and the United Kingdom are no longer active. Thus far, the European Union has vowed that it “will act to safeguard its economic interests,” with the French government urging a swift response to protect the European steel industry.

Why It Matters: If tariffs go into effect in March, they will send another round of shock waves across the globe as the United States is the world’s largest importer of steel and aluminum. In 2024, the United States imported roughly $31.7 billion in steel products and $17.7 billion in aluminum products that fall under Section 232 tariffs. The true value of imported steel and aluminum subject to tariffs had been substantially lower, however, due to country-specific exemptions. Factoring in these exemptions, the United States only had tariffs on about $5.5 billion of aluminum and $6.7 billion of steel. Eliminating these exemptions would raise the import values subject to tariffs by 220 percent for aluminum and 373 percent for steel.  There would also likely be consequences for the United States in reneging on past agreements. Finally, this presidential action may have ramifications for Section 232 tariff authority, as these tariffs appear to have originated via executive order rather than the typical process of instigation, followed by investigation and the review process conducted by the Department of Commerce that may take several months. This act once again bolsters presidential authority over tariffs, much in the same way as the president’s first use of the International Emergency Economic Powers Act to impose tariffs on China last week.

Looking Ahead: March will be a big month for final decisions on Trump’s delayed tariffs as, alongside steel and aluminum, there are the across-the-board tariffs on Canada and Mexico looming in the background. If both sets of tariffs were to take effect, it is unclear whether certain metal products from Canada would effectively be double taxed upon entry into the United States, facing both Section 232 tariffs on top of a 25-percent tariff on all Canadian products. More likely than not, the month-long delay is meant to buy time for trade negotiations with key U.S. trade partners that wish to avoid a trade war. As was the case during President Trump’s first term, steel and aluminum tariffs were briefly placed on Mexico and Canada but an exemption deal was eventually struck. Since the tariff news broke earlier this week, other countries are already attempting to find some sort of solution, including Canada, which recently sent every Canadian premier to Washington, D.C. for the first time ever just to talk trade. If the goal of these tariffs is truly to develop domestic industries, there may be no room for exemptions this time around. If the goal is instead to drive countries to the negotiating table, there may be hope for a select few countries to be spared.

Reciprocity for Thee but Not for Me 

What’s Happening: President Trump and his trade team have shifted their focus in recent days from instituting a flat, across-the-board tariff on all countries to instead implementing reciprocal tariffs. In theory, this would mean U.S. tariffs on imports would match the tariff rates other countries have on U.S. exports. In practice, it looks more like U.S. tariffs will be raised to match those that are higher but may not be reduced to match lower rates – for example, those maintained by the European Union. President Trump, who was supposed to hold a reciprocal tariff press conference today at 1 p.m., has yet to provide clarity on whether these tariffs will mirror the average tariff rate at the country level or will be product-specific.

Why It Matters: According to the World Bank, the U.S. effective tariff rate is somewhere around 1.5 percent, which is higher than many developed countries but is nowhere near the lowest globally. Some major U.S. trade partners with higher tariff rates include the United Kingdom at 3 percent, China at 3.1 percent, Mexico at 4.8 percent, South Korea at 8.6 percent, and India at 11.5 percent, just to name a few. Were the United States to implement a policy of country-specific tariff reciprocity, the weighted average tariff rate would jump from 1.5 percent to about 4.8 percent, which would certainly mean substantial increases in costs for U.S. consumers.

Looking Ahead: With reciprocal tariffs on the way, it is likely that U.S. exports will face retaliatory measures of some kind. At a minimum, significantly higher U.S. tariffs will damage foreign industries reliant upon exports to the United States, leading to slower economic growth in the developing world. This may lead to large-scale layoffs and ultimately less demand for U.S. goods if foreign consumers have less disposable income. A best-case scenario is that the reciprocal tariff proposal is merely – and once again –  a warning shot for other countries to begin lowering their barriers to entry so that the United States can save face and refrain from issuing more tariffs.