How Trump’s Steel and Aluminium Tariffs Shape the U.S. Economy

Quick Summary:

• Tariff Declaration: Former U.S. President Donald Trump announced an increase in steel and aluminium import tariffs from 25% to 50%, effective June 4, citing slow progress in trade negotiations with the EU.
• Economic Context: Steel and aluminium are critical inputs for industries like transportation, defense, construction, power generation, agriculture, etc.,making the tariff increase impactful across sectors.
• U.S. Economy update: The U.S. economy contracted by 0.2% in Q1 of 2025. inflation was at 2.31% (below recent levels but above the Federal reserve’s threshold), with unemployment steady at 4.2%.
• OECD Forecasts: Predicted slowing GDP growth for the U.S., down from 2.8% in 2024 to an estimated 1.6% for 2025; global GDP growth anticipated to drop from 3.3% (2024) to 2.9%.
• Economic Implications of Tariffs: Higher tariffs could lead to increased domestic prices and reduced consumer surplus while transferring some benefits to domestic producers.
• Effective Rate of protection Analysis:

– Increased costs due to higher input taxes on steel/aluminium likely create disincentives for manufacturers such as auto companies like Ford.- Negative rate of protection (-25%) calculated using economic models highlights challenges faced by American firms under trump’s new trade policy.

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Indian Opinion Analysis:

India should view developments surrounding tariff policies critically given its own reliance on steel and aluminium exports as well as global economic interconnectedness that impacts trade flows and pricing dynamics nationally.The escalation of tariffs risks disrupting international supply chains while contributing towards inflationary pressures globally-including India’s markets-due to raised commodity prices downstream across industries reliant on these metal inputs (e.g., automobiles). India’s manufacturers should monitor fallout closely within both export-geared opportunities alongside negative producer-side impact ripple uncertainties felt whenever-regional-demand aligning infrastructure offsets arise-stage buffering against-added competitiveness hurdles doubly shrinking comparative exporting-principal stands alike requisite contextual-balancing layered discussions amidst unprecedented frictions worldwide