Especially for the European market, added pressure through additional taxes on steel and aluminum may cause severe cuts in producers’ revenues. President Trump’s claim to put America first on his agenda seems to come true with his announcement to raise custom duties. What are the causes? Which consequences are to expect? And which solutions may defuse the situation?

The current situation in European steel-markets

In the last decades, the EU market for metals continued to grow steadily. After the rupture in 2016, when the prices for crude steel as well as Aluminium were dropping to an all-time low, metal producing industries across the European Union have fought their way back. With Trump’s announcement to insert severe punitive tariffs for all kinds of imports to the US, sales figures in the sector on the continent and the UK are indirectly at risk. 25% of the price will be added for imports to the United States. Although the exports of steel and Aluminium to the US are relatively small, the penalties will hit the worldwide industry – Europe included.

A constant struggle in the US markets

The US’ steel industry is far from working at full capacity. These days, American steel mills utilization is levelling at 73%. With Trump’s punitive tariffs, it is expected to grow to 80%. The Aluminium plants’ capacity is also not completely exhausted. Here, the penalties will cause an increase of 32%. Trump wants to protect the American steel and metal industries, which have not at all recovered from the last economic crisis in the sector. The opposite is rather the case:

-       Since 2000 at least 10 mills were closed.

-       The employment rate in the US steel industry declined sharply around 20%.

At the end of the day, the President fears a severe loss of supporters. Many steel workers voted for his presidency based on his promises to secure their jobs.

Why are Trump’s punitive taxes relevant for the European market?

European metal working companies like Thyssen-Krupp or Kloeckner metals UK sell their goods mainly within the domestic market and to the Chinese market. Therefor, the penalties will not hit them directly. Though, the consequences will be noticeable within the worldwide steel and Aluminum producing industry. The Federation of German Steel Industry (Wirtschaftsvereinigung Stahl) warns of glut of steel due to the high import taxes to the US. International producers will search for different customers in other markets. EUROFER, the European association for the industry, even fears a decline of 50% of prices in the continent’s markets.

Is there a threat of a trade war? 

The World Trade Organization says so. According to their latest statements, Trump’s threats could lead to a trade war. If so, in the long run there won’t be a winner.