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Starting tomorrow, President Trump plans to impose a 25% tax on all imported steel and aluminum. He briefly threatened even higher tariffs - 50% on metal coming from Canada. This is the latest escalation in the president's trade war. Now, Trump also taxed imported steel and aluminum during his first term in office, but as NPR's Scott Horsley reports, those tariffs did not provide the boost to domestic manufacturers that the president promised.
SCOTT HORSLEY, BYLINE: Tariffs have the potential to raise prices, which is politically risky in a country where voters are already scarred by inflation. So Commerce Secretary Howard Lutnick offered some reassurance on Sunday's "Meet The Press."
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HOWARD LUTNICK: Some products that are made foreign might be more expensive, but American products will get cheaper, and that's the point.
HORSLEY: But that's not how it turned out the last time Trump imposed taxes on imported steel and aluminum. When the price of imports went up, many domestic steel and aluminum makers raised their own prices to match.
H O WOLTZ: When a product is tariffed, the price rises for both domestically produced and imported products.
HORSLEY: H.O. Woltz runs a company in Mount Airy, North Carolina, that buys hot-rolled steel wire and braids it into a cable used to reinforce concrete. Trump's original tariffs in 2018 were a double whammy for his company. Those tariffs forced him to pay more for raw steel in the U.S. but didn't apply to foreign competitors who could sell their own finished cable for less.
WOLTZ: So we found ourselves with a market price for the raw material that was probably the highest in the world but competing with world market prices for prestressed concrete strand because there's no tariff on it.
HORSLEY: Woltz says those foreign competitors grabbed so much of the market, some of the domestic steel mills he used to buy from went out of business - the opposite of what the tariffs were supposed to accomplish. Many companies like Woltz's begged the Trump administration to either grant them a tariff waiver so they could buy raw steel at a lower price or tax the finished products their foreign competitors were selling. Christine McDaniel, who tracked those requests at the Mercatus Center, says it was a recipe for crony capitalism.
CHRISTINE MCDANIEL: You don't want a government picking winners and losers. The steel and aluminum tariff inherently is a government picking winners and losers. The politically connected companies may have had a leg up in getting their requests approved.
HORSLEY: As the trade war dragged on, unrelated businesses were caught in the crossfire. Europe retaliated for Trump's steel tariffs by adding a tax of its own on American whiskey. Chris Swonger, who heads the Distilled Spirits Council, says sales in Europe plunged by 20%.
CHRIS SWONGER: The export market for the U.S. distilled spirits industry is a critical one. Distilled spirits shouldn't be in the line of fire, but we have been over the last five or six years, and it's had a detrimental effect on our industry.
HORSLEY: Eventually, the steel and aluminum tariffs were relaxed, but now we're poised for a rerun. Canadian liquor stores are pulling American bourbon from their shelves, and Europe is threatening to tax American motorcycles and blue jeans. There is one difference this time around. The tariffs have been extended to cover more finished products, including the concrete strand that Woltz's foreign competitors make. That should help level the playing field, although Woltz is still worried about unintended consequences.
WOLTZ: I don't really know what the solution is. But in terms of the world that we live and compete in, in the U.S., the solution is not to tear off one part of the supply chain and leave the rest of the supply chain to fend for itself.
HORSLEY: Woltz says the real problem in the market is overproduction by China, that a trade war that pits other countries against each other does little to address that.
Scott Horsley, NPR News, Washington.
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