Steel prices have been rising steadily since January, because demand has been rising. While I'm generally opposed to tariffs in principle, I can see some reasoning behind these. Canada and Mexico are beneficiaries of the NAFTA agreement, meaning imports from them are less expensive than from elsewhere. China, in an attempt to circumvent their own trade agreements has for years sent product to Canada or Mexico, where it is rebranded before being imported into the US. One reason for the tariff is to curb that behavior.
The other reason, and the reason it's now being applied to other countries, is because of the massive tariff imbalance that has been in place for a number of years. In general, for nearly all product groups, EU tariffs on US imports have been much higher than US tariffs on EU exports. Because it was the status quo, even if imbalanced, changing that will of course have some effect on current market conditions.
What it amounts to is the US tends to be a net importer, while other countries tend to be net exporters and rely on the US market. Why we've accepted that for so long is an ideological discussion that in my opinion is the root cause of a number of our current headaches in manufacturing.
In the short term, prices will go up. If tariffs are a strategy to encourage our trade partners to enter new and more beneficially mutual trade agreements, then they may not become the status quo. If they are a strategy to increase US production and jobs, they may become the new status quo and the market will adjust to those conditions. Overall I hope intently that it's the former and not the latter, as don't believe that protectionism is a viable long term economic strategy - See Germany's current woes. They've had 30 years of seemingly excellent economic performance by first becoming protectionist, but eventually have had to trick all of Europe into the EU debacle to keep their exports up and now that house of cards is looking quite rickety.
I also don't understand the protectionist view that cheap commodities from other countries hurts America. If China was trying to sneak in Chinese gold at a 50% discount to American gold, would we put a tariff on it or buy every ounce they would give us? How is steel or aluminum different?
Finally, I think it's a mistake for the EU, or any nation, to look at these tariffs and say, "Ok, trade war is on, here's our tariffs." They will lose. Ask the Saudis how that worked out for them. They inflated the price of oil until it became an opportunity for North American companies to find a way to replace Saudi oil. Once they did, it was expensive to produce, but prices were high so it was profitable. So the Saudis went the other direction and collapsed the price hoping to starve those NA companies. Some rolled up, some mothballed, and others kept innovating until their price lowered, while the entire Saudi nation felt the crunch of reduced revenue. When they relented and the price climbed again, NA production ramped right along side of it. They killed their golden goose, and it will never come back.
A trade war will effect everyone involved negatively initially. Prices will rise. Demand will increase. Shortages will occur. And then? What next? Wages will go up for the first time in 25 years. Americans will realize that the "service economy" was a lie. And they will flock to high tech manufacturing jobs, and American industry will do what it always does absent of political handcuffing.
I guess just be happy that steel cost is 5 to 15% of knifemaking costs and not 35 to 45% like some industries. The short term is going to suck for us.
