President Trump is once again creating waves - and another vacancy at the White House. Gary Cohn, his top economic adviser, resigned this week having been unable to persuade Trump against imposing import tariffs of 25% and 10% on steel and aluminium, respectively.
With around 6.5m Americans employed by US steel and aluminium companies, the President has opted to impose a global tariff on both materials in an attempt to both restrict imports and allow the US industries to recover.
However, Cohn and others fear that it will in fact hurt the US economy - undermining the impact of recent corporate tax reforms. The last time tariffs were imposed on steel in the US was 2002, when George W Bush was in power. Instead of creating employment, the move cost the industry about 200,000 jobs.
While China is the world's largest producer of both metals, it actually accounts for just 2% of steel imports to the US. Its bigger problem is that there is a world-wide glut of steel. China is also still smarting from Trump's less-widely talked about tariff on imports of solar panels and washing machines in recent weeks. A trade war is not out of the question.
Canada is actually the biggest supplier of both metals to its North American neighbour. Germany is also a large supplier, and both Brazil and South Korea have been cited as exporting countries considered to be most exposed to the tariffs. But those most affected could retaliate with tariffs of their own. Indeed, EU officials have already indicated this is the course of action they will take.
And, of course, the UK is not immune. Speaking on BBC Radio 4, the week before the announcement, UK Steel's head of policy, Richard Warren, underlined the fact that the US is a significant export market for British producers. “It would have a significant impact if it did go ahead”, he said. “The tariff is very big, considering the thin margins that larger steel operators will be operating on.”
Stock markets around the world fell on the news this week, with steel makers in particular taking a hit. It will be important to keep an eye on the impact it has on global growth.
In the coming weeks, manufacturers that rely on steel and aluminium inputs are likely to be hit the hardest. Later, US exporters could be hurt by any retaliatory measures: Harley Davidson and makers of Bourbon Whiskey are companies already mentioned by the European Commission.
Darius McDermott, managing director of Chelsea, commented: “Steel and aluminium companies are the obvious losers, along with car makers, and any fund with exposure to these areas will be the first to be affected.
“Longer term it is hard to tell. Tariffs come and go and, as we saw when Trump tore up the Trans-Pacific Partnership agreement at the very start of his presidency, he can underestimate the ability of the rest of the world to function very well without the US. He may well be doing more harm than good to the US.”