To The Moon

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Alright, everyone—over the past week, the U.S. under Trump has made several controversial moves, and there are two major missteps we need to discuss. These decisions could trigger widespread chaos and a global economic crisis.

The first, and perhaps the most shocking, is Trump’s push to take control of the Gaza Strip. Directly from his own words, he stated that the U.S. would take over the region, clear out the destruction, and rebuild it into an economic hub with endless jobs and housing. While this plan claims to offer development, it raises serious concerns about peace in the Middle East. If carried out, it could lead to ongoing instability and worsen the global oil crisis. Whether this actually happens is uncertain, but even the possibility is alarming.

The second immediate crisis is Trump’s decision to impose a 25% tariff on steel and aluminum imports—a move that will shake global manufacturing, hurt U.S. airlines, and give China a competitive edge. More importantly, it won’t achieve his goal of bringing manufacturing back to American soil.

By implementing this sweeping tariff, which applies to every steel-exporting country in the world, Trump has taken an extreme step. Even more concerning is the possibility that he could raise the tariff rate even higher—25% today, but potentially 100% in the future. On top of this, reciprocal tariffs from other nations are also in play. It feels like we’ve entered the Black Hole. If Trump believes this will revive American manufacturing, he’s in for a harsh reality check.

This decision also delivers a serious blow to U.S. airlines that rely on steel imports. It reinforces what many have suspected—Trump is determined to reshore production at any cost. The tariff is straightforward: steel buyers, such as construction firms, will now have to pay an additional 25% import tax to the U.S. government. As a result, importing foreign steel becomes less attractive, and demand will shift to domestic suppliers.

The impact will be felt worldwide, with several economies taking a major hit.

G7 Exporters to Take the Biggest Hit

The country set to suffer the most from Trump’s tariffs is Canada. He aims to slash over $11 billion in steel exports and nearly $10 billion in aluminum exports from Canada. Mexico, with $6.5 billion in steel exports, will also take a significant hit. But looking at the bigger picture, the entire world is set to feel the impact.

BRICS nations like India and Brazil are among the targets, while major G7 exporters such as Japan and Germany are also being affected. There’s no escape. However, in the immediate term, Canada will bear the brunt of the damage.

This situation serves as a harsh lesson for every exporting nation: relying on a single customer for trade is a massive risk. It leaves economies vulnerable to tariffs and trade wars. More than 70% of Canada’s steel exports go directly to the U.S., and in 2023, Canada exported over 6 million tons of steel globally. The exposure is severe. The Canadian steel industry employs 23,000 people directly and supports over 100,000 jobs indirectly, making diversification an urgent necessity.

As expected, steel prices and producer stocks are plummeting. Despite the decline of U.S. manufacturing, the American economy remains one of the largest consumers of steel. In 2022, the U.S. imported $43 billion worth of iron and steel—more than even China. The reality is that U.S. steel producers simply don’t produce enough to meet demand, so they rely heavily on imports, bringing in over 25 million tons annually.

A 25% tariff on imports is a serious problem, especially given the ongoing energy crisis. Western steel producers—such as those in Germany and Japan—are already struggling with squeezed profit margins, and this move could crush their earnings even further. Unlike industries like software or semiconductors, steel is a low-margin business where profits are often in the single digits. Companies like Japan’s Nippon Steel will be among the hardest hit.

The bigger agenda behind all this? Forget Biden’s promise of "friend-shoring"—it’s not happening. The goal is clear: reshoring production to the U.S. across all industries, including steel.

In 2023, the U.S. imported nearly $10 billion worth of aluminum and steel. If you’re looking for the biggest economic casualties of this policy, here they are: Canada and Mexico face massive losses. China, on the other hand, is an exception. As the world’s largest steel consumer, it can easily absorb its excess production. But for the rest of the world? The fallout will be severe.

Australia Anxiety While China Grin

What’s truly unfortunate is that these tariffs won’t just impact major exporters—they’ll also hit smaller players hard. Out of nowhere, Australia is starting to panic. Even though its steel and aluminum exports to the U.S. amount to only around $1 billion, the country is scrambling to get an exemption.

Australia is outright pleading with Trump to reconsider. And when I say pleading, I mean really pleading. Officials are pushing diplomatic efforts, emphasizing their case in discussions with the U.S. administration:

“We will navigate any differences diplomatically and continue to advocate for Australia to be exempt from any steel and aluminum tariffs. We have raised this issue in recent ministerial discussions and will keep making the case—not just for Australia’s national interest but also because we believe it aligns with U.S. interests as well.”

So, Australia’s prime minister is politely asking Trump to back down. Whether that works out remains to be seen.

Now, you might ask: why don’t countries like Australia or Japan just shift their steel exports to other buyers? After all, steel is always in demand, right? The answer is both yes and no. Yes, there will always be buyers, but in commodities, it’s all about price.

Looking at global steel imports, the biggest growth markets are Vietnam and Taiwan. However, these markets are nearly impossible to break into because they demand dirt-cheap steel. Taiwan and Vietnam are both manufacturing-heavy economies, not end consumers like the U.S. They need low-cost imports to keep their own exports competitive—especially in industries like electronics and semiconductors.

For high-cost steel producers in Japan, Germany, and Australia, shifting sales to these markets overnight is simply unrealistic. So, who benefits the most from Trump’s steel trade war? Spoiler: it’s not the U.S., and it’s definitely not the G7 exporters.

The big winner here is China. This is where supply chains and low energy costs make all the difference. Chinese steel suppliers can outproduce any competitor in the world. In 2023 alone, China accounted for over 1 billion tons of steel production—more than 50% of the entire world’s output.

There’s a reason the U.S. slapped tariffs on Chinese steel back in 2018—it was just too cheap for American producers to compete. But here’s the catch: China is also the world’s biggest consumer of steel. So, while G7 producers are struggling with Trump’s new tariffs, China remains largely unaffected.

Beijing is actively pushing its economy toward greater domestic consumption, meaning that as steel demand rises, China can simply absorb its own supply. For high-cost producers, Trump’s tariffs feel like a disaster. But for China? It’s just another Tuesday.

U.S. Manufacturing Downfall Begins

Now, let’s talk about what Trump’s steel tariffs mean for the U.S. economy. Will this move actually revive American manufacturing? Is punishing G7 allies the key to bringing back domestic steel production?

When Trump first imposed steel and aluminum tariffs in 2018, it did initially boost U.S. steel production. Domestic smelters ramped up operations to compensate for the shortfall. As a result, U.S. steel production capacity jumped from 75% to over 80%. By 2021, it even reached 85%, despite disruptions from the pandemic.

Sounds like a win for Trump’s trade war, right? Not exactly. While production went up, so did steel prices—a lot. And that’s bad news for an economy already struggling with inflation. In the long run, this undermines Trump’s goal of re-shoring manufacturing.

Initially, steel prices dipped, but then they skyrocketed. Some of this was due to pandemic-related disruptions, but a major factor was U.S. steel producers hiking prices. Why? Because in the U.S., labor costs are higher, energy is more expensive, and with tariffs protecting them from cheap Chinese steel, American producers could charge whatever they wanted.

Which brings us to today—if global steel exporters are getting hit with new tariffs, will this bring U.S. steel prices down or push them even higher? The answer seems clear: it’s bad news for U.S. manufacturers.

Studies have shown that the 2018 tariffs mainly benefited steel companies and their profits. For the broader U.S. economy, they did more harm than good. They frustrated key allies like Germany, Japan, and Canada, disrupted trade relationships, and—most importantly—made manufactured goods more expensive in the U.S.

So, let’s sum up the damage:

• Germany, Japan, and Canada? Furious.

• Mexico? Annoyed.

• China? Amused.

• The U.S. cost of living? Going up like SpaceX Rocket.

This is Lala World economics at its finest. Tariffs and protectionism don’t make an economy more competitive in the long run—they do the opposite.

When Trump first considered slapping tariffs on Canadian and Mexican steel, automakers warned that car prices could rise by as much as $3,000. Back then, manufacturers feared their supply chains in Canada and Mexico would take a hit.

Now? That’s no longer a concern—all domestic production will be forced to use American steel and aluminum. But there’s a catch: this so-called "exceptionalism" comes at an exceptionally high cost for American consumers.

New Inflation Shock

Sorry, Chives, you just got played and chopped.

• Behind door A? Higher prices.

• Behind door B? Also higher prices.

• Everyone gets higher prices.

This move is going to put immense pressure on U.S. household budgets. It’s not like consumers are seeing massive salary increases to offset these costs. In fact, the financial situation for many Americans is already dire.

Here are some alarming statistics:

• U.S. credit card defaults have surged to their highest level since 2010, up 50% year-over-year.

• The bottom third of Americans have zero savings—nothing to fall back on, MAGA can help?

Does raising the cost of manufactured goods seem like a good idea in this scenario? How does high inflation help everyday people?

This is why Trump’s trade war feels so baffling. It defies basic economic logic. No matter how you look at it, this move is going to Taichi right back onto the U.S. economy.

Unless Trump suddenly invents machines to replace human labor or colonization South America to drive down costs, these tariffs won’t achieve their intended goals. All they’ll do is push steel prices even higher—and consumers will be the ones paying the price.

So, what do you think? Will Trump’s steel tariffs actually work? How will his G7 allies react to this sudden move? Let me know your thoughts below.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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