And Saleha, that's a lot different than a lot of other industries, right? In autos, for instance, they have been warning against the tariffs and in fact, got the exemption last week from President Trump on those Canada and Mexico tariffs.
Not only is Canada my homeland, I should say, the number one source of US aluminum imports. I mean, it's just huge amounts. So to tariff these things, Trump is obviously, on the one hand, trying to create an incentive to develop new smelters, which, by the way, are not done quickly, and which, by the way, use a lot of electricity. So it's a bit of a tricky landing to stick.
But in the meantime, it's just simply going to be an extra cost for American companies that use aluminum, which of course is a wide range of industries. So these, these are pretty big ones and I should note they're bigger than the first term. I think people are missing this a little bit, right?
Trump did a lot of stuff in his first term, and steel and aluminum were a big part of it, but there were exemptions for countries and there were also different rates.
What he's doing here also is raising the rate on aluminum to 25 from 10. Last time it was 10. So the scope is broader in terms of application. There's no exclusions. Trump even mused about an Australia exclusion, didn't give it. And the rate is higher for aluminum. It's the same for steel.
Mohsin: Where does most of the US' metal supply come from? What countries?
Wingrove: It depends what you're talking about.
Aluminum is certainly Canada. Steel is more of a mix. And there's been appetite to hit some of those countries. And the big concern on this, of course, is China.
And the concern is, is Chinese steel kind of sneaking in through Mexico and Canada or other places? And that's the justification you'll hear from the White House for these tariffs. Now, those third party countries, of course, their position is, ‘well, if that's a genuine concern, let's talk about that rather than, you know, paint with a wide brush.’
Russian metal production obviously also looms large in this, and it's a whole other kettle of fish there, given the sanctions and the potential for relief of those sanctions if indeed there is a ceasefire deal in Ukraine. But fundamentally, he thinks tariffs will support the existing domestic industry and incentivize new ones. It's just murkier.
Mohsin: All right, we're talking about a lot of tariffs being proposed, but Josh, in the next 24 hours, maybe none of the tariffs that we're talking about happen, right? Because we both covered the first term. And that pendulum swings.
Wingrove: I mean, it absolutely swings. Saleha, you know, you know very well.
So yeah, as we sit here today, maybe by the time people listen to this, things will have changed.
But I will say Trump has been sturdier on some tariffs than others, and the steel and aluminum tariffs, those are on the sturdier end of the spectrum for sure. He has been talking about them from the beginning. The other ones have kind of shifted a bit as the winds blow, but he really feels strongly about steel and aluminum.
I should note, again, that the industry groups in particular on steel really support this, and so, I would not bet on much, until we start seeing real supply chain snarls or potentially market impacts.
Mohsin: So what's the approach here? Can we call what Trump is doing a strategy of um, kind of having these announcements and then saying, okay, we're going to back down. We hear about a new threat every week. And then there's reactions from markets and business leaders and world leaders. And then there's mixed messages. Is it a strategy? What, what is this?
Wingrove: This is a strategy, I think. It's just, the rollout has been chaotic. I don't know that there's any way to say it. Trump and his supporters see benefit in that. They see benefit in unpredictability. But markets obviously see much less benefit in that unpredictability.
And so right now, this sort of will he or won't he is hanging over a lot of things. And if you're the Americans and you actually do want to steer investment away from, say, Canada and Mexico, having a big cloud of uncertainty over Canada and Mexico isn't the worst thing in the world.
So, that sort of part helps him. The whipsaw nature of it that we're seeing in markets, I think, I think is less helpful. And we've seen that from Republicans saying it publicly. I was talking this week with Marc Short, who was, uh, an aide to President Trump in his first term, and then a very senior aide to Vice President Pence, who, of course, is no longer Vice President.
And he was saying, you know, in the first term, Trump got a lot of feedback from people talking about the benefits of trade, both economists talking about the benefits of trade, and national security folks talking about the benefits of trade and keeping your friends your friends. This time around, Short doesn't see that around him.
You've got a lot of tariff evangelists around the president, who himself loves tariffs, right? He talks about it as being his third or fourth favorite word.
So Trump is really jazzed on tariffs right now. The people around him are jazzed on tariffs right now. It's not super clear how many people in the room are saying, ‘Eh, I don't know.’ And so that's why I think we're seeing this sort of steady march.
Mohsin: And what is the message, do you think, that Trump is sending to the world by pushing forward with these metals tariffs now, while other broader tariffs remain in limbo?
Wingrove: The message he wants to send is that America is back and open for business, and that if you come here and make stuff here, you will get preferential treatment. You won't pay tariffs. And remember, of course, Republicans are talking about a tax bill that may lower the corporate tax rate, in particular, even lower for domestically produced goods.
How they measure that, what the content threshold would be, very unclear. So he is trying to essentially remake the American economy. He talks in particular pretty nostalgically about industries like steel, in particular US Steel, which of course used to be this mammoth in America and on the market, but now, of course, has fallen on more muted times to say the least and so I think he harkens back to the era of like an American manufacturing renaissance.
The flip side is that a lot of the manufacturing companies in America right now who have factories running as I speak, get a lot of inputs from abroad. Cheaper inputs that help them remain competitive with their competitors in other developed economies.
And if we are tariffing those inputs, it risks the businesses that are already here. It risks the factories and supply chains that are already here. Uh, and of course, it could make goods more expensive. If you make cars in America, solely in America, with American made parts, those cars are going to be more expensive than is the case now, which of course will reduce demand for American cars. Trump is keen about those trade offs, but we should be clear eyed about those trade offs.
Mohsin: Coming up… how world leaders are responding to the latest tariffs…and the ripple effects they could have on American consumers.
Mohsin: Trump's promised a lot of reciprocal tariffs on countries that impose tariffs themselves on the US. Are we seeing any major metal exporting countries retaliate for these new tariffs?
Wingrove: Immediately. The Canadians are retaliating. The Europeans announced theirs within hours.
Mohsin: On Wednesday, the Canadian Finance Minister Dominic LeBlanc described a “dollar for dollar” approach. Canada imposed reciprocal tariffs on the US. ..
Dominic LeBlanc: We will use every tool at our disposal to defend Canadian jobs and Canadian businesses and support workers through these challenging times.
Mohsin: And Ursula von der Leyen, the European Commission President, described their countermeasures as “strong but proportionate”:
Ursula von der Leyen: As the United States are applying tariffs worth $28 billion, we are responding with countermeasures worth 26 billion euros.
Wingrove: And this is the risk here, because Trump is three weeks away from announcing what he believes will be reciprocal tariffs. But when he makes these measures, and in particular with the way he's making them, he's creating a political dynamic in these other countries where they are compelled to respond.
Their voters would be outraged if they didn't. And then Trump treats that as an escalation. They respond. He responds. They respond again. And you can see how this is going to spiral. And of course this tariff spiral, the impacts of them spiral. The costs for consumers spiral. The market fallout spirals.
Mohsin: Tell me more about that. How is that going to ripple through the economy?
Wingrove: Well, right now, the US is tariffing, you know, some goods on Canada and Mexico. That's a lot of stuff. That's, you know, gas if you live in the Midwest, because Canada is the number one source of crude oil imports by the US.
That's fruit. I have a toddler, Saleha, all I do is buy fruit. Honest to God, that's like half my life. Uh, you know, a lot of agricultural products, of course, come from Mexico. There's lots of goods that Americans will pay more for.
The Trump team argues that tariffs are a tax cut for Americans. You will not find a single economist outside of the Trump administration who agrees with that. Tariffs are paid by the importer. This is a statement of fact. Sometimes the price is reduced by the seller because they know the importer is paying a tariff. And so, you know, China, Canada, and Mexico might eat some of the cost, but fundamentally the dollars are paid by the importer.
Every time Trump imposes a tariff, that is an import tax paid by American firms. And the question is how much that will be passed on to consumers, not if it'll be passed on to consumers. Trump thinks it'll be worth it because he's envisioning his golden age, where, you know, manufacturing jobs rebound and, you know, salaries rise and everyone has more money in their pocket, but the reality of tariffs is that costs rise and everyone pays that price.
Mohsin: Well, let's talk about that. Ok, tariffs go into effect. We have less metal. Do American metal makers have the capacity to scale up enough to meet the demand?
Wingrove: Some of them do. Steel for sure has more. But some steel makers in America rely on scrap from abroad. Guess what? That's tariff now, you know? So their input stream now has an extra cost associated to it.
And then on aluminum, there's just nowhere near American capacity. So in the meantime, American companies will just try to use less aluminum or they'll simply pay the tariff. Which means they'll pay a tax to the American government to buy the aluminum that they're using right now and of course a lot of things use aluminum.
So I think, yes, there is of course going to be an incentive for companies to establish manufacturing facilities and hire manufacturing workers in the US. But these things do not turn on a dime.
Mohsin: Have we heard anything, any kind of reaction from American-based manufacturers in reaction to these tariffs?
Wingrove: Right now the producers are happy. The people that are unhappy are the other industry groups. Everyone else who needs steel. Everyone else who needs aluminum. Because they know that their costs are going up, because now they either are going to a small number of American producers, who of course have more pricing power right now, or they pay a tariff and, and buy abroad, which, you know, means paying more.
Mohsin: US Steel, a major American steel producer, is currently in the middle of a struggle over a potential acquisition by Japan's Nippon Steel Corp. Joe Biden blocked that deal, and Trump opposes it. How does all of this fit into the picture of these new tariffs?
Wingrove: The fate of that deal is unclear. And Trump announced that he would not let Nippon Steel own a controlling stake in US Steel. But left open the possibility that they could have less than that, and he called it an investment, maybe a minority stake.
Our reporting specifically is that the companies really didn't know what he meant by that, and there are no talks really around that. And right now there's a legal fight ongoing with respect to President Biden's decision to block it. The Trump team has not moved to adjust that in any way.
Uh, and therefore, the question for Nippon Steel is, do you want to buy part of US Steel? And no one really knows how that will look, but that is a good indication of how the mood on steel has shifted. It is now being treated explicitly as a national security type of industry. When Trump did that in his first term, that was more controversial and now there is more bipartisan agreement on steel as like a tactical sector.
Trump basically is saying, you don't need the Japanese to buy you because I'm going to give tariffs and it's going to prop up your company in the meantime.
Mohsin: Josh, as this develops over the next couple of days, couple of hours, I don't know, what are you eyeing?
Wingrove: I think the big question is twofold. Number one, how many countries he will enact reciprocal tariffs on. And how wild they're going to go in calculating that number. And number two I'm watching is the sectoral tariffs. We have the steel and aluminum ones, but they're not the only ones. He's teed up some on copper. He's talked about lumber. He's talked about pharmaceutical drugs, semiconductor chips, and, hugely, autos.
When do those come? With what scope? With what exemptions? At what rate? That is a huge factor, I think, in all of this. So, both of these are allegedly coming, you know, in a few weeks, in April. And so I think that's why people are watching all this fallout so closely.
Mohsin: Thank you for joining.
Wingrove: Thank you for having me.
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