When President Donald J. Trump imposed aluminum and steel tariffs during his first term in office, he was accused of fanning already-hot inflation, and arguments were made to do away with the tariffs in order to save the economy from rising prices. This, however, is “a deeply dishonest linkage”, in the words of the Economic Policy Institute (EPI). The first proof for this is that those tariffs were put in place near the beginnings of 2018 and 2019, while inflation heated up much later, in March of 2021. Secondly, those tariffs weren’t substantial enough to increase inflation significantly.
Clogged supply chains and rising prices characterized the Covid-intensive years of 2021 and 2022, and there was a very tangible lesson to be drawn from the situation. “Recent bottlenecks and price surges have underscored the risks that come with sprawling global supply chains”, explained economist Daron Acemoglu. Trump’s impulse to revive production on American shores was, then, rooted in the need to solve a genuine problem, and one which, in fact, did contribute to inflationary pressures. Fragile supply chains also clouded America’s ability to ensure she had enough supplies to meet her own critical needs.
Indeed, Trump’s new proclamations on aluminum and steel tariffs, made on February 10, 2025, were partially aimed at ensuring America would be amply supplied with respect to her defense and infrastructure requirements in today’s geopolitically volatile world. This would be done through fostering the growth of domestic industry in those two materials, so that the US could be independent as far as supply was concerned. Consequently, the economy might expect some of the other benefits of such duties, which, in Trump’s first term, “led to thousands of jobs gained and higher wages in the metals industry”, so said the White House in February this year. The White House also reported that the earlier tariffs catalyzed over $10 billion in financing for aluminum and steel mills in the US.
All of this suggests the tariffs were a fairly sensible move, but one person who disagreed was the president of the European Commission, Ursula von der Leyen, who promised “firm and proportionate countermeasures” to Trump’s 2025 proclamations. Von der Leyen didn’t like the sound of those announcements because of Europe’s lame economic growth scenario, which was exacerbated by the still-raging conflict in Ukraine. On top of that, the continent was bringing in much more goods from the US than it was sending out to her. The prospect of another blow to Europe’s export-centered economy was not heartening.
What, exactly, were the effects of Trump’s first-term tariffs with regard to both the US economy and European trade relations? And, is von der Leyen in a position to play hard ball with Trump this time around? Join us for some answers.
In 2018, Trump slapped 6.4 billion euros’ worth of European steel and aluminum products with protective tariffs. Specifically, he imposed 25% tariffs on steel imports, and 10% on aluminum. The European Commission President at the time was Jean-Claude Juncker, who responded by entering into a deal with the US. The deal stipulated that, in exchange for Trump putting the aluminum and steel tariffs on hold, Europe would step up their purchases of American soybeans and liquid natural gas (LNG). When Joe Biden took office, his predecessor’s tariffs were kept on ice until a more permanent solution – called a Global Arrangement of Sustainable Steel and Aluminum (GASSA) – would be set in place. This never ended up happening.
As to the efficacy of the 2018 tariffs, this was impeded by the fact that they “were treated too often as an end goal rather than a strategic tool” in the EPI’s language. In other words, there wasn’t enough tactical use of the tariffs in concert with other measures to boost American production. In spite of this, the EPI write that the tariffs did succeed to an extent in rescuing the US’s steel and aluminum industries. “Rescuing” would be the correct word because, in February 2025, the EPI believed that “chronic global overcapacity and unfair trading practices… have pushed US producers to the brink of financial inviability”. Those practices included large and illicit government subsidies as well as currency manipulation, particularly on the part of China.
What were the effects of the 2018 tariffs on domestic steel prices in the US? Prices rose by 10.2% between February and September of that year, but they soon settled down to levels lower than before the tariffs were introduced. It was only later on, near the end of 2020, when there were severe supply shortages, that steel prices jumped significantly higher. If you compare the inflationary pressure caused by the pandemic between August 2020 and November 2021 with the pressure triggered by Trump’s steel tariffs, the former was about ten times greater than the latter.
What Trump actually did in February 2025 was raise the level of aluminum tariffs to 25% and close off exemptions to the pre-existing steel tariffs, which were also set at 25%. It’s estimated that $3.1 billion euros in European exports will be impacted by the moves. Looking at specific countries, Germany is America’s sixth biggest supplier of these materials, while Italy ranks at number ten. Those two large and important economies, then, appear particularly vulnerable to the aluminum and steel tariffs of 2025.
Ursula von der Leyen may be using fighting words, but it’s possible that the European Union (EU) won’t end up imposing retaliatory tariffs on US exports. In the way of her predecessor, she may choose to negotiate with the US in various ways. Analysts suggest she might offer to buy more American LNG and agricultural produce, just like Juncker did. Alternatively, she may express willingness to buy US-made defense equipment, or lower the EU’s own 10% import duties on American cars.
In the event that negotiations don’t work out, retaliatory tariffs could be on the cards. This is likely to mean that the EU’s own suspended duties on American steel and aluminum would be restored. In addition, it’s possible that specific imports from the US would be targeted, with examples including orange juice, peanut butter, bourbon whisky, and Levi jeans. According to the Atlantic Council, this round of retaliation could impact 4.8 billion euros worth of US products – $2 billion more than the first EU retaliation. They could also activate something called their ACI (anti-coercion instrument).
This instrument was created in December 2023 as a means of letting the EU kick back at nations who try to coerce it into undesirable courses of action. Aside from turning up the dials of existing import tariffs, the ACI gives the EU power to restrict intellectual property rights, slap duties on digital platforms, and limit FDI (foreign direct investment) in the United States. Beyond this, the ACI would give von der Leyen the right to keep American financial services providers out of the European market and restrain the inflows of US sanitary products and chemicals.
Activating the ACI probably wouldn’t happen overnight since the EU needs to get the go-ahead from at least 15 of its 27 member states, and the whole process could take up to six months. On the other hand, there have been several expressions of readiness on the part of European nations to mount a united trade battle against the United States. Some of them have come from countries that normally reject import tariffs, like Holland, the Baltic states, and Poland. Considering the precarious state of Europe’s economy, this may amount to shooting themselves in the foot and, in the view of the Atlantic Council, “A transatlantic trade war would hurt both sides”.
How Steel Tariffs Impact Forex, Commodity, and ETF Trading
Trade policies and tariffs often have ripple effects across financial markets, and the steel and aluminum tariffs announced by President Trump in 2025 are no exception. These measures influence forex markets, commodity prices, and exchange-traded funds (ETFs) that track affected industries.
For forex traders, tariff announcements introduce volatility into currency markets, particularly for the U.S. dollar (USD) and the currencies of steel and aluminum-exporting nations. Commodity traders closely watch such developments because tariffs can directly impact the prices of raw materials, while ETF investors evaluate how these policies affect stock indices and sector-specific funds.
Let's explore how Trump's latest tariff policies could shape these markets.
Tariffs can significantly influence currency valuations by altering trade balances, impacting inflation, and affecting overall economic growth. When tariffs are imposed, they increase the cost of imported goods, potentially strengthening or weakening the local currency depending on how trade partners respond.
If tariffs successfully reduce imports and increase domestic production, the U.S. trade deficit may shrink, which could support the dollar.
However, retaliatory measures from Europe and other trading partners may lead to reduced exports from the U.S., negatively impacting economic growth and pressuring the dollar downward.
The possibility of prolonged trade conflicts creates currency volatility, making forex markets particularly sensitive to developments in trade negotiations.
The euro (EUR), particularly tied to Germany’s export-driven economy, could face depreciation pressures if European steel and aluminum manufacturers struggle with reduced U.S. demand.
The Australian dollar (AUD) and Canadian dollar (CAD), both linked to commodities and trade with the U.S., could also experience fluctuations based on whether their metal exports are exempt from tariffs.
For forex traders, monitoring U.S. trade balances, inflation reports, and Federal Reserve policy reactions will be crucial in navigating currency fluctuations driven by trade policy shifts.
Steel and aluminum tariffs directly affect commodity prices, particularly for base metals like iron ore, aluminum, and copper. When tariffs are raised:
Commodity traders should closely watch supply chain adjustments, global metal stockpiles, and production reports from U.S. steelmakers to anticipate price movements.
ETFs provide traders with exposure to stocks, commodities, and industry sectors, and tariff policies can significantly influence ETF performance.
For ETF traders, keeping an eye on trade policy developments, industrial production reports, and global supply chain adjustments will be critical for making informed investment decisions.
For the moment, it appears that President Trump will not be doing an about-turn on the score of the aluminum and steel tariffs. On the contrary, he has warned that they “may go higher”. The only exception he may make is on Australian imports due to that nation’s purchases of American aircraft. Another difference between these and the first set of tariffs is that Trump has extended them to include, not only primary metal goods, but also finished products. Trump will also direct the US Customs and Border Protection to tighten the screws when inspecting incoming cargoes. In particular, he would like to eliminate the deliberate misclassification of steel products by foreign exporters to avoid tariffs.
Trump’s 2025 aluminum and steel tariffs may be more strategically managed than the 2018 duties, increasing their efficacy. Officials in Trump’s new administration have said explicitly that the taxes are part of a broader strategy to boost domestic manufacturing and keep prices low. That strategy also comprises tax cuts and injections of new life into American industry. The careful orchestration of this project will be crucial in determining its ultimate results. In the words of the EPI, “Tariffs are no substitute for comprehensive new trade and manufacturing policies to rebalance trade and rebuild American manufacturing”.
The impact of steel and aluminum tariffs extends far beyond the metals industry, influencing forex markets, commodity prices, and ETF performance.
As trade tensions evolve, understanding these market dynamics can help traders seize opportunities and manage risks in an uncertain trading environment.
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