US 25 per cent tariffs on all steel and aluminium imports came into force on March 12 at 04:01 local time, escalating trade tensions between Washington and its main commercial partners.

US President Donald Trump, a staunch advocate of "America First" economic policies, pledged in February to tax these two metals and their derivatives without exceptions, including Canada and Mexico, partners in the North American free trade agreement. 

Canada will suffer most from the measures as it supplies half of US aluminium imports and 20 per cent of steel imports, according to consultancy EY-Parthenon, as reported by AFP. For aluminium, the United Arab Emirates, South Korea, Bahrain and China, each representing 3-6 per cent of US imports, will also feel the impact.

Brazil, India, Argentina and Mexico supply the market in smaller amounts but "could still suffer supply chain disruptions as buyers adjust procurement strategies", the consultancy warned. In the steel sector, Brazil (17 per cent of imports) and Mexico (10 per cent) will be the most affected after Canada, followed by South Korea, Germany and Japan.

The US imports approximately half of the steel and aluminium used domestically across various industries including automotive, aerospace, petrochemical and consumer goods. Trump has employed tariffs as a negotiation tool with trading partners since beginning his second term, using them to incentivise domestic manufacturing and generate federal revenue.

The president previously imposed steel and aluminium tariffs during his first term, but the current measures cover a broader range of metal products and apply universally without the exceptions that previously benefited Canada, Mexico and Australia or the quota systems granted to Brazil and Argentina.

China, Canada and Mexico have borne the brunt of these tariff increases, with additional 20 per cent charges for China and up to 25 per cent for the latter two. Trump has accused all three of insufficient action against illegal fentanyl trafficking and, regarding his neighbours, demanded greater efforts to combat illegal migration.

Following weeks of negotiations, Trump agreed to exempt Mexico and Canada from the 25 per cent tariffs on products covered by the North American free trade agreement until April 2. From that date, "reciprocal" tariffs will theoretically enter force, designed to tax imported products at the same level that countries impose on equivalent American goods.

While Canada switfly hit back with tariffs on US steel and aluminum imports worth $20.7bn, Mexican President Claudia Sheinbaum said her administration will hold off from retaliating, for now. “We will wait until April 2, and from there we will define whether reciprocal tariffs will also be applied in the case of aluminum and steel or depending on how things come. We will keep this process and the dialogue open until then,” she stated.

The tariff announcements have created uncertainty in stock markets, with Wall Street erasing almost all gains made since Trump's November election and sparking recession fears. Inflation risks also loom, according to Clarke Packard, researcher at the Cato Institute, who does not rule out that "tariffs could quickly reflect in prices" and fears the succession of announcements creates "enormous uncertainty" about the US economic trajectory, reported AFP.

The economic toll on the United States is substantial. According to simulations by the Kiel Institute for the World Economy, inflation is anticipated to increase by approximately 0.41 per cent due to rising prices. US exports are forecast to drop by 1.37 per cent. The cost of imported steel and aluminum, meanwhile, is set to rise sharply, driving up production expenses for various US industries. As a result, US steel and aluminum manufacturers are expected to pass these higher costs onto domestic consumers, which may erode their competitiveness on the global market.

“These tariffs may appear symbolically in line with Trump’s protectionist ‘America First’ policy, but ultimately they harm US economic interests,” said Julian Hinz, Research Director for Trade Policy at the Kiel Institute for the World Economy.