Steel tariffs just got a lot bigger

On 6 April the administration rewrote its tariffs on metals. Duties used to be calculated on the value of the steel or aluminium inside an imported product. Now they apply to the full invoiced value of any manufactured good that contains imported steel or aluminium components.

How the metals tariff grew

The national-security tariffs on metals date from March 2018, when the first Trump administration imposed 25 per cent on steel and 10 per cent on aluminium under Section 232 of the Trade Expansion Act of 1962. The rates on both were raised to 50 per cent in June 2025, and over the course of that year the Commerce Department added hundreds of so-called derivative products, from appliances to machinery parts, to the list. Until now those derivatives paid duty only on the value of the metal they contained, which required importers to document the steel and aluminium content of each product. The new rule removes that calculation by taxing the whole good.

From the metal to the machine

Under the old rules, an imported machine containing $1,000 of foreign steel paid duty only on that $1,000. Under the new rules, if a $100,000 piece of industrial equipment, a car or a household appliance uses imported steel, the whole $100,000 product faces the 25 to 50 per cent tariff. The change widens the tax base across millions of manufactured goods, many of which contain only a sliver of foreign metal.

The arithmetic is severe. At a 50 per cent rate, the duty on that machine rises from $500 to $50,000, a hundredfold increase for the same physical content of foreign steel. Expressed as a share of the product's value, the effective tariff jumps from half a per cent to half the price. No plausible cost saving from foreign sourcing can absorb a jump of that size, so the rule works less like a tax than like a ban on imported goods that contain any foreign metal.

What the rule is meant to do

The design has a clear industrial logic. By making the metal's origin decisive, the rule gives foreign manufacturers a strong reason to use American steel and aluminium in products bound for the American market, and it gives American manufacturers a reason to build in the United States rather than import finished equipment. Content-based valuation also invited disputes over how much metal a product contained, and taxing the full invoice closes that avenue. From the point of view of an administration seeking to support domestic mills, the change is a tightening of a rule that leaked.

Fewer imports, higher bills

Economists' models suggest that the switch to full-value taxation will roughly double federal customs revenue on manufactured machinery. The same models suggest thousands of imported product categories will stop being worth shipping at all. Importers will cut volumes, and buyers will pay more for what still arrives.

Those two forecasts pull against each other, which is why the revenue estimate deserves caution. A tax that stops trade collects nothing on the goods that are no longer shipped, so the revenue gain depends on how much trade survives. For the econometrician, the change is also a break in the series: customs revenue, import volumes and machinery prices estimated under the old metal-content rule will not predict behaviour under the new one, and models calibrated on 2025 data will need fresh estimates of how sensitive importers are to the new rates.

The 2018 lesson

The first round of metals tariffs offers a warning about who pays. Research by economists at the Federal Reserve Board found that the 2018 tariffs were associated with net job losses in American manufacturing, because higher input costs and foreign retaliation hurt far more workers in steel-using industries than the tariffs protected in steelmaking. Steel-using manufacturers employ many times more people than steel producers. Extending the tariff to the full value of finished machinery pushes that cost further down the chain, onto the factories, farms and builders that buy equipment.

Winners and losers

Domestic steel and aluminium producers gain, as do American makers of machinery, appliances and equipment that compete with imports. The losers are companies that buy capital equipment built abroad, from food processors and farmers buying tractors to manufacturers installing new production lines and firms building data centres, which rely heavily on imported electrical gear. Foreign suppliers with no American metal in their products are shut out, and their governments are likely to respond. Consumers pay through dearer appliances and, over time, through goods made with more expensive equipment.

Retaliation is the other risk. When the metals tariffs were first imposed in 2018, trading partners answered with duties aimed at politically sensitive American exports, from farm goods to bourbon and motorcycles. Extending the tariff to the full value of finished machinery hits European, Japanese, Korean, Canadian and Mexican exporters of equipment, and each of those governments faces domestic pressure to respond. American exporters of agricultural products and consumer brands are usually the first targets of such responses.

Where it could give

The strongest counterargument is that the rule will be softened in practice. Exemptions, product exclusions and preferential treatment for trading partners that negotiate can remove large categories from its reach, and foreign manufacturers can switch to American-origin metal faster than critics expect. Customs will also need time to enforce a rule that depends on tracing the origin of every steel component in a complex machine, and early enforcement may be patchy. Even with those caveats, the change raises the cost of imported capital goods at a time when manufacturers are being asked to invest more at home.

The signals to watch are guidance and exclusion processes from Customs and the Commerce Department, monthly orders for core capital goods, producer prices for machinery and equipment, and import volumes in the categories affected. What began as a duty on metals has become a broad tax on imported machinery. American manufacturers and builders who rely on foreign equipment will probably feel it first, in higher costs and thinner margins, within months.