Goldman Sachs says Trump’s Tariffs Will Hurt Canada and Mexico, not Russia

U.S. president Donald Trump’s proposal to impose import tariffs on steel and aluminum would lessen their effects on Russia and China in comparison to more targeted restrictions, an analysis from Goldman Sachs says.

According to Bloomberg, the report said the Trump proposal would hurt Canada, Mexico and the European Union (EU) more than China and Russia, which have been criticized by proponents of restrictions on imported steel with flooding the market.

“By imposing across-the-board tariffs to all steel and aluminum imports, the larger economic impact is on Canada, Mexico and the EU, and it ironically eases the economic impact to China and Russia,” the bank analysis released Monday said.

The choice of broad-based tariffs would create a two-tiered market, Goldman Sachs says, because the U.S. does not produce the same kinds of metals it imports. Those imports largely come from U.S. allies such as Canada, Mexico and the EU.

Companies are unlikely to make the kinds of investments needed to produce those kinds of metals given the uncertainty of both policy and market demands, the report said. Americans will bear the brunt of the tariffs, and simply pay more for those imported metals.

Congressional Republicans are appealing to Trump to scale back his tariffs decision.

“I think the smarter way to go is to make it more surgical and more targeted,” Speaker Paul Ryan (R-Wis.) said on Tuesday.

Trump is expected to finalize his decision on tariffs this week, but thus far has indicated that he intends to maintain his course.

“No, we’re not backing down,” Trump told reporters at the White House on Monday, when asked about the plan.

Goldman said the U.S. action — which invokes Section 232 of the 1962 Trade Expansion Act — would risk adding to inflationary pressures just as the Federal Reserve has been raising interest rates. “The tariffs reinforce the reflationary pressure already under way globally.”

“Net consumers of steel and aluminum in the U.S. now face cost disadvantages relative to their international competitors, especially at a time when the labor market is tight and wage inflation is picking up,” the bank concluded. “This is the irony of Section 232: a tariff intended to support U.S. industry may end up boosting margins and investment for a small subset of producers while leaving the broader economy at a disadvantage.”