Investing.com - U.S. President Donald Trump's move to impose new tariffs on steel and aluminum imports points to a drive by the White House to use revenues from the levies to help pay for a proposed extension to tax cuts, according to analysts at Raymond (NSE:RYMD) James.
Trump signed dual executive orders imposing 25% tariffs on steel and aluminum imports on Monday, wiping away previous exceptions for allies like Canada, Mexico, South Korea and others that were put in place during the Biden administration.
The levies, as well as measures to eliminate hundreds of thousands of product-specific tariff exclusions, are set to apply to millions of tons of imports of the materials. The moves will come into effect from March 4, media reports said, citing a White House official.
Trump will also create a new North American standards aimed at curbing minimally-processed steel and aluminum imports from China and Russia that can bypass certain tariffs. Other products using foreign-made metals are also covered by the tariffs.
Saying the changes would extend to all U.S. trading partners "without exemptions," Trump called the move a "big deal" and part of a broader push to "make America rich again."
Investors are now gauging if Trump will follow through on a separate threat to impose reciprocal tariffs on Tuesday or Wednesday, with worries swirling around a potential increase in international trade tensions.
In a note to clients, the Raymond James analysts led by Ed Mills said Trump's latest tariffs are a sign of his "seriousness" around his trade agenda and an indication of a "strong desire" to harness revenues from the duties to partly offset the cost of extending trillions of dollars in tax cuts.
"We will be watching for whether the steel and aluminum tariffs are used as a pressure tactic to, for example, force concessions such as market access and purchase commitments in other sectors in order to gain relief -- or whether their national security grounding, lack of exclusions, and the broader desire to raise tariff revenues will ultimately make the duration of the tariffs more durable," the analysts wrote.
"Trump’s comments while signing the order that this is 'the beginning of making America rich again' supports the latter part of this outlook."
Trump himself has previously signaled a willingness to bolster revenues through protectionist trade policies, saying in his inaugural address last month that the U.S. "will tariff and tax foreign countries to enrich our citizens." However, it remains to be seen how much of an impact the tariffs, which have made up only around 2% of annual revenues in recent years, could have on the federal budget.