Not content with a 25% tariff on steel and aluminium being imported into the United States, Donald Trump used his self-proclaimed “Liberation Day” to announce a minimum 10% tariff on all products from all countries in the world – and much higher tariffs on those countries he deemed to be the “worst offenders”. Clearly, Mr Trump wanted the spotlight to fall upon him. Of course, whether he achieves any of his long-term aims remains to be seen. However, condemnation was the initial response from economists around the world. And global share markets have dropped massively. “He just dropped a nuclear bomb on the global trading system,” Ken Rogoff, former chief economist at the International Monetary Fund, told the BBC. Likewise, political leaders were aghast. Australia´s Prime Minister, Anthony Albanese, declared the tariffs to be unfair, unwarranted and “not the act of a friend”. However, having said earlier that tariffs are a bad idea, Mr Albanese said his government wouldn´t respond with any retaliatory tariffs.

He warned that would amount to “a race to the bottom”. The worldwide baseline tariff rate of 10% went into effect on April 5. White House officials said the roughly 60 “worst offenders” would also be subjected to reciprocal tariffs from April 9. Some of the key trading partners and the overall percentage of their tariffs are: the European Union 20%; China 54%; Vietnam 46%; Thailand 36%; Japan 24%; Cambodia 49%; South Africa 30% and Taiwan 32%. Goodness knows what the small African country of Lesotho did to so offend the USA to be hit with a 50% tariff on all its products.

Australia exports only a small amount of steel to the United States, so the tariffs won´t bring our house down. The European steel industry is less fortunate. Under the first Trump administration´s Section 232, EU steel exports to the US decreased by more than one million metric tonnes (Mm/t), according to the European Steel Association (EUROFER). With Trump´s recent announcement, the EU stands to lose the same amount again. “President Trump’s America First policy threatens to be the final nail in the coffin of the European steel industry. If European steel disappears, so too does European automotive, European security and defence, energy infrastructure, transportation and others. What is at stake is European sovereignty,” said Dr Henrik Adam, President of EUROFER. There is a secondary concern as well. With global excess capacity having reached record levels in 2024 and set to increase again in 2025, the EU market – already saturated with cheap steel imports from Asia, North Africa and the Middle East – will be further flooded as steel intended for the US market is redirected. The latest data unveiled by the OECD shows global steel excess capacity is expected to grow from an estimated 602 Mm/t in 2024 to 721 Mm/t by 2027 – more than five times the EU’s steel production. “The trends illustrated by the OECD prove the global steel overcapacity problem not only remains unsolved but it’s constantly and significantly worsening,” said Axel Eggert, Director General at EUROFER. As example of the pressures global manufacturers were experiencing even before Mr Trump´s latest round of tariffs, British Steel has begun negotiations for the likely closure of its two blast furnaces and steelmaking operations in the northern England town of Scunthorpe. This comes after British Steel´s Chinese owner, Jingye Group, failed to agree to a rescue package with the UK Government.

As always, it will be events in China which largely dictate the fortunes of steel industries around the world. China exports roughly 10% of the steel it produces, and last year only 2% of steel imported into the US came from China. So, the Trump tariffs will have minimal effect on China´s steel industry. Severe overcapacity is of far more concern to the Chinese steel industry – driven by a sharp decline in domestic demand and a limited reduction on the supply side. According to Xu Xiangchun, a senior analyst at the commodity consultant, Mysteel, China’s domestic steel demand has declined for four consecutive years, reaching approximately 890 Mm/t in 2024. This was down by 160 Mm/t on the 2020 level. Over the same period, however, the country’s crude steel output fell by only 60 Mm/t. As a result, Chinese steel prices have dropped by 40% over the past four years, while industry profits have plummeted by 93%, underscoring the severity of the imbalance between supply and demand. Xu says production cuts are essential to restoring balance. He advocates what´s known as `proactive production reduction´ which would involve Chinese steelmakers voluntarily releasing output cut plans in advance and executing those cuts accordingly. Xu says such cuts don´t necessarily imply large-scale or long-term reductions. If implemented gradually over a one-year period, there would be minimal disruption to normal operations, he claims. Despite the current oversupply, China remains a massive steel consumption market, with annual demand still around 900 Mm/t. Xu believes a reduction of 50 Mm/t in crude steel output could support Chinese steel prices, boost market confidence, and suppress raw material costs, ultimately leading to a notable recovery in industry profitability. “If a clear and effective production cut plan is rolled out, the current pessimism in the steel market could ease,” Xu said. In such a scenario, Chinese steel prices could stabilize, with this year’s average price holding steady year on year. Meanwhile, iron ore prices may soften, and overall industry conditions could improve. However, Xu emphasized that proactive steel output reduction is not a long-term fix for overcapacity.