Trump announced the new plant at an Oval Office event alongside steel executives and Iowa Republicans, including two running for office.
The event highlighted Iowa's elevated status for Republicans and for Trump, who on Monday pledged to campaign there in coming weeks.
The new steel plant is being built by Mesabi Metallics, a Minnesota company owned by India's Essar Group, an industrial conglomerate.
Trump said the project will become the largest steel plant in the United States. It is expected to produce 10 million tons of steel a year once fully built out.
The plant was projected to begin production in 2030, supplied by a new $2.5 billion iron ore mine that Mesabi developed along Minnesota's Mesabi iron range.
Trump said the American steel industry was "roaring back to life," crediting it to the 50 per cent tariffs on steel imports that he imposed last year.
"Everyone is building their plants here because they don't want to pay tariffs," Trump said. "It's really not that complicated."
Trump in June also approved the takeover of iconic American steelmaker US Steel by Japan's Nippon Steel, a move that had been blocked by Joe Biden, his Democratic predecessor, and initially opposed by Trump as a 2024 Republican presidential candidate.
After returning to office, Trump later backed a deal that gave the federal government a say in some company decisions.
Trump and Vice President JD Vance have both touched down in Iowa this year to shore up Republican enthusiasm and energise voters before the November 3 elections.
Jeff Kaufmann, chairman of Iowa's Republican Party, said the announcement was made possible by the state's Republican leadership.
"Investments of this magnitude do not come to Iowa by accident," he said.
"They come to states with low taxes, responsible budgets, fewer burdensome regulations, and leaders who understand that the role of the government is to help job creators succeed, not stand in their way."
Joe Broking, chief executive of Mesabi Metallics, called the announcement a "major moment for US made steel," saying the factory would be supplying a critical product that US national defence, cars and trucks, shipbuilding, household appliances, energy and infrastructure depend on.
Mesabi Metallics is based in Nashwauk, Minnesota. The Essar Group is an industrial conglomerate formed in India in 1969, with ventures in industries from energy and mining to technology and retail, according to its website.
