Doubling steel tariffs is expected to lead to job cuts in US manufacturing. While jobs in steel manufacturing may increase, broader manufacturing sectors face greater job losses.

A Federal Reserve study indicated that Trump’s 2018–2019 steel tariffs significantly increased input costs. The number of jobs preserved in the steel industry was surpassed by job losses across broader manufacturing sectors.

Wider Industrial Impact

Concerns have been raised that the impact of doubling these tariffs could be more severe than previous measures. The combination of higher steel tariffs with additional tariffs could exacerbate these effects.

What the earlier research uncovered is relatively clear: while a targeted industry may benefit at first glance, the wider industrial base ends up bearing the cost. Higher steel tariffs, particularly if doubled, will increase input costs again, and not just for one or two niche sectors — we’re talking about firms that rely on steel in everyday production, from automotive lines to equipment assembly. When that raw material costs more, profit margins are quickly squeezed, especially for exporters who cannot easily pass on higher prices to global buyers.

The Federal Reserve’s findings left little to interpret — more jobs were lost than saved. It’s worth noting the chain reaction. If a company pays more for steel, it can either raise prices, hoping customers will absorb the rise, or trim its workforce and operations. Most move toward the latter.

Now, with this new round of proposed tariffs, we must weigh what’s actually at stake beyond rhetoric. The fear here isn’t abstract. It’s based on past response patterns backed by data. Manufacturing firms don’t just tighten hiring — they often restructure supply chains, reduce domestic orders, or delay capital expenditures. That slows business investment and starts a feedback loop that depresses production.

Understanding Pricing Risks

For those of us watching pricing models, it’s not just tariffs alone we’re tracking anymore — it’s how they might combine with other measures still under discussion. Any lean toward a protectionist stance, especially if it involves broader commodity tariffs, compounds volatility. One policy lever can ripple into another, far from the original intention.

What’s particularly worth watching over the next few weeks is how pricing risk translates to implied volatilities in inputs and industrials. We’ve already seen earnings downgrades in industries depending on cost efficiency. Moving forward, exposures to industrial spreads may widen unexpectedly, particularly where input-heavy operations intersect with low-margin production.

Those with exposure in constructed credit or anything with sensitivity to industrial defaults may want to readjust delta hedging ratios. Even small adjustments in raw input prices can skew the balance when operating margins are narrow. Historical hedging strategies, especially those built around 2018 assumptions, may no longer hold.

There’s also a growing likelihood of distortions within industrial futures curves — as index-adjusted forward demand might diverge more sharply from current book orders. That’s where mispricing opportunities, or risks, begin to surface. Keep in mind, a firm shift in policy mix tends to dislocate near-term movement from longer-term equilibrium pricing.

So, while early-season earnings may still reflect older pricing contracts, we should anticipate that longer-dated volatility arrangements — those across third- and fourth-quarter options chains — could start showing new bias signals. We’re watching for these windows — and they’re more visible just before institutional rebalancing triggers at month-end.

Positioning against these moves requires discretion, though, especially in spread carries. There’s now a far stronger probability of escalation — not just in tariffs but in reactive trade responses. These can undermine previously assumed forward pricing anchors. One thing we’ve seen before: once industrial supply and labour dynamics shift in one region, mirror effects tend to spill over fast in correlated sectors.

Stay close to structural supply-demand ratios in raw inputs. Watch for any abnormal widening in calendar spreads, particularly among mid-tier producers. Small disruptions in procurement channels could lead to exaggerated backwardation — historically a sign that markets are adjusting to risks faster than sentiment might suggest.

Finally, keep signals tight — any sudden move in tariffs often comes with announcements rather than leaks. That means carrying position redundancies in conditional spreads might help more than predictive broad bet placements. We’re not in a wait-and-see moment — we’re in a react-and-prepare window.

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