The Economic Impact of Steel and Aluminum Tariffs

A trade war has been brewing between the U.S. and many other countries. What started as tariffs on 18 products in January 2018 has grown to encompass more than 10,000 products. The trade war escalated when President Trump imposed additional import duties on steel and aluminum imported into the U.S. from other countries.

These tariffs stand at 25% for steel and 10% for aluminum with very few countries exempted. The tariffs have spurred retaliatory actions from several major U.S. trading partners, including Canada, Mexico, China, and the 28 members of the European Union.

To provide a tangible, quantitative view of how steel and aluminum tariffs and retaliatory tariffs will impact the U.S. and other countries, FTI Consulting utilized the Global Trade Analysis Project (“GTAP”) model, a dynamic model of international trade and finance, to simulate the budding trade war. The GTAP model can analyze international trade across 57 different industries and 140 countries and regions across the world. We examined two tariff scenarios – one without and one with retaliatory tariffs from the U.S.’s trading partners facing the steel and aluminum tariffs.

The analysis and results presented here—which considers the generalized macroeconomic effect of tariffs on metals and specific retaliatory actions—is not exhaustive. With trade and tariff policy-related news changing daily, continued analysis designed to better understand the impacts must be both detailed and dynamic.