On February 10, a proclamation released by U.S. President Donald Trump revealed that the U.S. will apply a 25% tariff to all steel and aluminum imports from March 12. The order will significantly increase aluminum tariffs, which were previously set at 10% during the first Trump administration. While steel imports were already subject to a 25% tariff that was put in place in May 2018, multiple countries including Canada and Mexico had previously been granted exemptions that will be removed under the most recent order. The reach of the new tariffs is also greater than those from 2018, as they include finished metal products like shaped metal and processed goods.
Aluminum-reliant industries expected to be most heavily affected
Approximately 82% of the United States’ aluminum demand – 4.3 million tons in 2024 – is met via imports, with domestic smelters only producing about 670,000 metric tons of aluminum. While an additional 470,000 tons of domestic aluminum production could theoretically be resumed, analysts estimate that additional capacity could take 6 months to a year to fully come online. The U.S. is also nearly fully reliant on imports of aluminum scrap, with 90% of such imports coming from Mexico and Canada.
Relative to aluminum exports, the U.S. imports significantly less steel, with about 25% of its demand met via imports. Again, Canada contributes the most of any country to U.S. steel imports at about 23% of imports, followed by Brazil, Mexico, and South Korea which combined provide an additional 38% of steel imports. Although the U.S. economy is less reliant on steel imports, data from the first round of metals tariffs in 2018 shows that domestic steelmakers were still unable to increase production significantly enough to keep prices down, despite steel production temporarily increasing to about 80% of capacity. Meanwhile, primary aluminum production never exceeded 64% of domestic capacity, and the price of both U.S. steel and aluminum proved to outpace production despite these increases. Since reaching these peaks, steel and aluminum outputs have again decreased to below pre-tariff levels.
Assuming tariffs are enacted as stated without exemptions, industries reliant on aluminum and its byproducts are expected to be most heavily affected due to the sheer significance of imports to the American market. The transportation sector, which includes automotive and aerospace manufacturers, is the largest consumer of aluminum, accounting for over 35% of demand. Ford Motor Co. executives have already revealed that although most of the company’s direct steel and aluminum supplies are provided domestically, their suppliers are reliant on international aluminum and steel sources and prices will consequently rise for the company, even in the event that the tariffs remain just rumors. Ford and General Motors Co. had estimated the more-limited tariffs on steel and aluminum imposed during President Trump’s first term could add as much as $1 billion (€967 million) to each of their costs. The food and beverage as well as the pharmaceutical sectors, however, could also face substantial price increases due to the product’s importance in containers and packaging like aluminum cans and foils. The Coca-Cola Co. has indicated the increase in price stemming from tariffs on aluminum cans may force the company to switch to plastic bottles to remain competitive.
Tariffs on steel products will most heavily impact the construction and building sector, which consume over half of all steel. However, the new tariffs are likely to impact other steel-reliant industries like mechanical equipment to an even greater extent given that finished metal products like extrusions and slabs are included. For example, under the 2018 tariffs, home appliance maker Whirlpool Corp.’s costs increased by $350 million (€338 million) due to higher steel prices. The broader scope of the tariffs could particularly harm the automotive, aerospace, and energy sectors, which are often reliant on specialty grades of steel that are typically imported.
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