As part of US President Donald Trump’s ‘America First’ agenda, the government has placed a 25% universal tariff on aluminium and steel this week, which may hit its own defence and security programmes in the near future.
Defence analysts from the Washington-based Center for Strategic and International Studies (CSIS) spoke to Naval Technology, outlining the eventual impact the trade war will have on the production of US surface combatants and aircraft, including, they specified, destroyers, carriers and F-35s, the vanguard platforms of the US Navy and Air Force.
Go deeper with GlobalData
Naturally, US allies have reluctantly implemented their own retaliatory tariffs in the metallurgy sector. Canada imposed tariffs, which came into effect yesterday, on nearly C$29bn ($20.6bn) on products imported from the United States. Similarly, EU tariffs on €26bn ($28bn) will come into effect in April.
According to the International Trade Administration, an agency within the US Department of Commerce, US steel exports have declined by 9.2% since 2015. The nation’s top three export markets are Canada, Mexico and the Dominican Republic.
US tariff policy rationale
The reality that protectionist policy goes both ways does not appear to dissuade the Trump administration from its current course.
While the White House narrative contends America has been “treated unfairly by trading partners, both friend and foe,” the Secretary of State Marco Rubio tried to rationalise the new measures on 12 March, arguing that the President “has outlined the need to develop a domestic capability.
“If you don’t have steel and aluminum you can’t build warships, you can’t build airplanes, and you are not an industrial economy.”
US Secretary of State, Marco Rubio
“If you don’t have steel and aluminum you can’t build warships, you can’t build airplanes, and you are not an industrial economy. There are things we have to be able to protect…
“A lot of countries out there who subsidise their industries so that they can gain global market share… they’re operating at a loss. Meanwhile, our [US] industries are trying to compete fairly, and that’s why [we] don’t have steel plants, and that’s why [we] can’t produce the aluminum. And that really threatens our national security in the long term.”
DDGs, carriers and F-35s
Steel and aluminium are key components of defence industrial production. DDG hulls are made of steel while aircraft carriers have more than 50,000 tonnes of steel plate. Aluminum alloys, meanwhile, contribute to the F-35’s lightness and strength.
Cynthia Cook, senior fellow, CSIS, elaborated on how the mutual tariffs on metals will increase the costs for both defence partners among different contract types.
“To the extent that material from Canada goes into production of [American] defence systems, that just raises costs,” Cook observed.
“Even for ‘cost-plus’ projects, where if it is notionally a pass through (so that the tariffs paid increase the costs, and the tariffs go to the US government [USG], so the USG gets what it paid), there are transaction costs that will increase the costs to the USG and the US taxpayer.”
“If there is a fixed-price contract where the government will not allow the increased material costs to be passed through, then the contractor will have to eat the increased costs and have lower profits. At every step of the process, tariffs increase the costs of having the USG as a customer.”
“The fact that the United States and its allies are having bitter economic confrontations helps both Russia and China.”
Mark Cancian, CSIS senior fellow
Currently, Canada is a member of the US National Technology and Industrial Base, and has a Security of Supply Arrangement and Reciprocal Defense Procurement Memorandum of Understanding with the US.
“It is one of our closest allies,” Cook reiterated, but “perhaps [Trump’s] hope is that tariffs will threaten Canada into compliance and they will spend more on defence.”
Either way, the ensuing trade war, which began with Trump targeting China, America’s pacing threat, has begun to turn to its allies, and this will weaken the West, says Mark Cancian, another senior fellow for CSIS:
“Although a trade war may not directly affect military capabilities, particularly in the near term, the fact that the United States and its allies are having bitter economic confrontations helps both Russia and China because it makes any coalition against them weaker.”
