Many have been wondering why President Trump levied 50% tariffs on aluminum, steel and copper despite these three metals being critical to many manufacturing processes. Looking deeper, it emerges that there are deeper reasons than just economics.
Trump’s political base is dominated by blue-collar workers, especially men. These are individuals that don’t have a college education and largely work or worked in factories. As manufacturing was offshored, these blue-collar workers took the brunt of the resultant job losses, and many are struggling to find employment.
The Make America Great Again movement is premised on restoring manufacturing so that this section of the population can thrive again. This partially explains why Trump has targeted imports of that trio of metals yet such hefty tariffs seem to defy logic to many analysts.
To understand how deeply Trump wants manufacturing to return to U.S. soil, think about the so-called “Rust Belt,” the stretch starting from New York State all through the entire Midwest. That reference to rust reflects the disused production sites and mills whose buildings and equipment are rusting and crumbling after activities there went silent when cheaper labor and inputs rendered state-side operations and products uncompetitive internationally.
For most of the last century, the U.S. was the number one global producer of copper, until Chile claimed this title. To this day, Chile is the biggest producer of copper globally. As for steel, the 1970s saw a rapid decline in U.S. steel production that was worsened by several recessions. Europe, South Korea and Japan developed efficient and less costly steel production technologies that supplanted those in the U.S., and that marked the end of American dominance in steel production.
During the last century, cheap electricity coupled with roaring domestic demand within the automotive, aerospace and defence industries enabled the U.S. to dominate aluminum production globally. After 2000, China emerged as a major producer and eventually became the largest aluminum producer in the world.
All these shifts led to economic decline in the states and towns where the production of those metals was conducted, and declines were also evident in regions where industries that depended on those metals existed.
MAGA is premised on restoring this lost glory and it is the reason why tariffs on these specific metal imports are so high.
For now, industries that rely on importing these inputs are going to feel the pain of those levies, and the challenges are likely to persist for a while until local extraction and processing of these metals ramps up to meet domestic demand, or Trump shifts goal posts again in true TACO format. But, given how deep his desire to give blue-collar workers their time in the sun, we are unlikely to see another TACO moment regarding these specific tariffs.
For exploration firms like Torr Metals Inc. (TSX.V: TMET) operating in Canada, the situation in the South across the border could present some unique opportunities to attract investment and ramp up company operations.
NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET
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