U.S. Expands 50% Tariffs on Steel, Aluminum to Household Goods

The administration of the United States President is launching another round of tariff measures, which some trade experts believe are more legally sound than the country-specific tariff rates previously imposed. These actions could have a similarly broad impact on imports.

The U.S. Department of Commerce is expected to release the results of investigations into several industries deemed critical to national security, including semiconductors, pharmaceuticals, and key minerals, within a few weeks. It is widely anticipated that these investigations will lay the groundwork for tariffs on a wide range of foreign products in these sectors.

Under the authority of Section 232 of the Trade Expansion Act, tariffs on steel and aluminum imports were imposed in 2018. Recently, the scope of these tariffs has been expanded to include consumer goods containing these metals.

According to an estimate from Michigan State University, the current 50% tariffs on steel and aluminum have affected nearly 200 billion dollars worth of steel, aluminum products, and household items such as fishing reels and brooms—an amount nearly four times that of the first term.

In contrast, the tariff measures implemented in April against major trading partners are considered less legally robust. The Supreme Court is being asked to consider overturning these tariffs. Some government officials believe that tariffs under Section 232 can effectively replace country-specific tariffs, which have faced legal scrutiny and hindered trade agreement negotiations with allies and adversaries.

During a press conference en route back from the G7 summit in Canada, the President stated that pharmaceutical tariffs would be implemented "soon," encouraging companies to relocate production back to the United States. "This will bring most companies, at least to some extent, back," the President said.

The most recent action taken under Section 232 involved the Commerce Department announcing last week that the 50% tariff on steel and aluminum products would be expanded to include household appliances such as dishwashers, dryers, and washing machines. According to the law cited by the President for implementing these tariffs, all these products are considered vital to national security.

Similar actions are expected for the remaining seven ongoing investigations. For example, the President has pledged to impose tariffs on smartphones produced by Apple and other competitors if they are not manufactured in the United States.

U.S. companies can petition the government to include domestically produced goods in the Section 232 tariff list. This year, the list of steel and aluminum tariffs published by the President already includes items such as exercise equipment, coat hangers, and door thresholds.

When the World Trade Organization ruled last month that the retaliatory tariffs were illegal and must be revoked, businesses and trading partners breathed a sigh of relief. The retaliatory tariffs, announced on April 2, were implemented under the International Emergency Economic Powers Act (IEEPA).

Even if the IEEPA pathway for implementing tariffs is blocked by the courts, the relief may be temporary.

During an online seminar earlier this month, the senior customs manager of the digital freight company stated that the authority granted to the President under Section 232 is intended to protect specific industries, but under the current inclusion process, "its scope could become quite broad."

"This could be a way for the President to continuously raise tariffs," he said, unlike the April 2 tariffs, which targeted entire countries rather than entire product categories.

However, the Section 232 investigations have had an indirect impact on the overall trade strategy: the investigations have injected uncertainty into negotiations between the United States and other countries, aimed at reaching agreements to reduce the higher tariffs announced in April and then suspended for 90 days.

A source familiar with the matter said that countries are cautious about signing agreements—even framework agreements—while these investigations are still ongoing, as this could mean giving up leverage to seek changes to subsequent industry tariffs.

During a press conference following the conclusion of the G7 summit, the Japanese Prime Minister emphasized the importance of slow and steady progress. "We cannot sacrifice national interests for the sake of reaching an agreement early," he added.

For negotiating countries, a key question is whether these product-specific tariffs will be layered on top of country-specific tariff rates. "This is very different from taking the higher of the two," Miller noted, "and they may not even need to be announced. The President could change his mind later."

Economists closely monitoring the impact of the Trump 232 tariffs include Professor Jason Miller of Michigan State University, a leading institution in the field of supply chain management.

He is concerned that this approach could have a greater inflationary impact. One indicator he is watching is the official producer price index for steel cans and tin products, which has risen 8.7% this year—even before the tariffs doubled earlier this month.

Tin-plated steel sheets were not a target of the first-term investigations but have been included this time. Given the high dependence of U.S. metal can manufacturers on imported raw materials, Miller believes there are three possible outcomes: importers shying away from foreign supplies, leading to a reduction in product variety and inflation, or demand being suppressed.

"It is still too early to say that inflation will not be triggered," he said. "These effects will take a considerable amount of time to manifest."