Impact of Trump’s Tariff on Steel and Aluminum Industry

In February 2025, President Trump reinstated a 25% tariff on all steel and aluminum imports, ending previous exemptions and escalating global trade tensions. Aimed at reviving domestic metal industries and reducing trade deficits, the policy has sparked strong reaction from key allies and is expected to raise costs across U.S. manufacturing, auto, construction, and aerospace sectors. While U.S. producers gain near-term pricing power, downstream industries face margin pressures, job risks, and inflationary headwinds. With America importing over 60% of its aluminum and 30% of its steel, the tariffs have far-reaching consequences. Without a broader strategy, this protectionist push may backfire, weakening U.S. competitiveness and global trust. Further, as trade partners look elsewhere, America risks losing its edge in the global supply chain game.

Impact of Trump’s Tariffs on Steel and Aluminum Industry

In February 2025, President Donald Trump reintroduced a 25% tariff on all imported steel and aluminum, aiming to protect U.S. metal producers from foreign competition. This move is part of his broader "America First" trade policy, which seeks to boost domestic industries by making imports more expensive.

How U.S. Steel and Aluminum Tariffs Changed Under Trump in 2025

In March 2018, the U.S. imposed a 25% tariff on imported steel and a 10% tariff on aluminum under Section 232 of the Trade Expansion Act, citing national security concerns. Over 2018–24, several key trading partners—including Canada, Mexico, the European Union (EU), Australia, Brazil, Argentina, and South Korea—were granted full or partial exemptions. These exemptions came in the form of either tariff exclusions or negotiated quotas, allowing select countries to export a limited volume of metal to the U.S. without incurring additional duties. These arrangements remained largely intact throughout both the Trump and Biden administrations.

In a significant policy shift, the Trump administration announced in February 2025 the removal of all country-specific exemptions and quotas. Under the revised framework, all nations are now subject to a uniform 25% tariff on both steel and aluminum imports, eliminating prior disparities. The move represents a return to a more protectionist trade stance, with potential implications for global supply chains and international trade relations.

Why It Matters

The U.S. imports about 30% of its steel and more than 60% of its aluminum from other countries. These metals are essential for industries such as automobile manufacturing, construction, and aerospace. By making imported steel and aluminum more expensive, the tariffs were expected to benefit U.S. producers but also posed the risk of raising costs for industries that rely on these materials.

In 2024, the U.S. consumed 63 million metric tons of iron and steel scrap, up slightly from 62 million metric tons in 2023. Steel production totaled 82.2 million metric tons in 2024, down 2.3% year-over-year, while the country’s raw steel production capacity stood at 104 million metric tons.

Despite ample domestic capacity, the U.S. continues to import steel due to lower costs, product specialization, and global oversupply. Moreover, certain products, like galvanized steel sheets, are not produced in sufficient volume locally, necessitating imports from countries such as South Korea and Vietnam. Trade agreements, tariff exemptions, and logistical efficiencies also support imports. Additionally, imports help reduce supply risks and offset production disruptions, especially during economic uncertainty. Although the U.S. has domestic resources for steelmaking, including iron ore and coking coal, it is not fully self-sufficient. The country supplements these resources through imports to meet local steel production demand. As a result, global market conditions and trade policies significantly influence the cost and availability of these essential raw materials in the U.S.

The U.S. is significantly more reliant on aluminum imports than for steel. Since 2020, three primary aluminum smelters have shut down, leaving only four operational smelters—a sharp decline from over 20 in the 1990s. These remaining smelters have a combined nameplate capacity of approximately 795,000 metric tons per year, compared to over 3.6 million metric tons of U.S. production in 2000. In 2024, aluminum consumption in the U.S. reached about 4.3 million metric tons, while domestic production stood at only 678,000 metric tons. The shortfall is met largely through imports, with Canada playing a key role as the top supplier due to geographic proximity and trade agreements. The U.S. also lacks adequate bauxite reserves, importing over 75% of its bauxite needs, mostly for metallurgical use. Domestic bauxite output is limited and primarily used for non-metal applications. Major suppliers like Guinea, Australia, and Vietnam help bridge this gap.

Strategic Objectives Behind the Tariffs

The primary rationale for the tariffs lies in the administration’s desire to strengthen the U.S. steel and aluminum sectors, which have faced competitive pressure from global oversupply, particularly from countries like China. By making imported metals more expensive, the policy intends to raise domestic capacity utilization to at least 80%—a level considered necessary for long-term industry viability.

A second key objective is to address structural trade imbalances. The administration views persistent trade deficits as a sign of economic vulnerability and industrial decline. By increasing the cost of imports, the tariffs are designed to shift demand toward U.S.-produced goods, thereby narrowing the trade gap.

National security considerations also play a central role. Steel and aluminum are vital inputs for defense and critical infrastructure. Trump’s team argues that over-reliance on foreign supply chains for these materials undermines military readiness and the ability to respond to emergencies. Additionally, the new framework aims to eliminate loopholes in earlier trade policies. Previous exemptions allowed some foreign producers to bypass restrictions. Under the revised rules, qualifying materials must be “melted and poured” (for steel) or “smelted and cast” (for aluminum) in the U.S., tightening enforcement and reducing circumvention.

A Global Shockwave: Market Reactions and Trade Risks

Initially, trade experts expected that key U.S. allies—Canada, the EU, and Japan—would be exempt, just as they were under Trump’s 2018 tariffs. However, in March 2025, the administration confirmed that no country would receive special treatment. This announcement sent shockwaves through global markets and prompted immediate backlash from major trading partners.

In response, Canada, the EU, and Japan hinted at imposing their own retaliatory tariffs on U.S. goods, ranging from agricultural products to industrial machinery. The Canadian government has imposed a two-tiered tariff structure on U.S.-origin goods, escalating trade countermeasures. A 25% surtax on $30 billion worth of U.S. goods has been in effect since March 4, 2025, followed by an additional 25% surtax on $29.8 billion worth of U.S. imports effective March 13, 2025, targeting steel, aluminum, and other products.

Meanwhile, the U.S. and China agreed to a 90-day tariff truce in May 2025, reducing tariffs on most Chinese goods from 145% to 30%, while China lowered its own from 125% to 10%. However, high tariffs still apply to certain categories, including low-value shipments and fentanyl-related items.

The market response to the tariffs has been mixed. While domestic steel and aluminum producers have seen near-term stock gains due to improved pricing power, sectors reliant on imported inputs have come under pressure. Notably, automotive and heavy machinery stocks have declined, reflecting investor concerns over shrinking margins and falling demand.

Aranca’s View

What Will Be Hit? Industries Caught in the Tariff Crossfire

Trump’s 25% tariff on steel and aluminum is not just about metal—it is a shock to industries relying on these materials. From cars to construction, the impact will be wide-ranging and costly.

1. Auto Industry: Higher Prices, Job Risks Steel and aluminum are key to car production, and higher costs could raise vehicle prices by up to $1,500, as companies like Ford and GM pass on the burden to customers. This may slow demand, reduce production, and put jobs at risk in an industry employing nearly 10 million Americans.

2. Construction: More Expensive Homes & Projects Rise in the U.S. steel prices will make new homes costlier, worsening housing affordability, and may force delays or cuts in government-funded infrastructure projects.

3. Beer & Soft Drinks: Pricey Cans The Trump administration imposed a 25% tariff on beer imports, including empty aluminum cans, under its aluminum tariff policy. This impacts over $7.5 billion in beer imports (2024 data), with Mexico leading at $6.3 billion, followed by the Netherlands ($683 million).

4. Aerospace & Defense: Rising Aircraft Costs Higher steel and aluminum prices could raise aircraft costs, affecting companies like Boeing, while also driving up military spending as defense equipment gets pricier.

Cost Pressure and Competitive Disruption

The reinstated 25% tariffs on steel and aluminum imports will likely push up costs for U.S. manufacturers, especially in the auto and industrial equipment sectors. Small and mid-sized firms are particularly vulnerable, with limited ability to absorb rising input costs or pass them on to customers.

Despite the tariffs, imported metal can still be cheaper than domestic alternatives, due to tight U.S. supply and price hikes by local producers. This leaves manufacturers stuck between higher costs and shrinking margins.

Metal-heavy industries will likely feel the strain. Equipment makers, for instance, may face rising costs for key components like hydraulic systems and frames, with limited short-term alternatives. Many would be forced to delay investments, cut output, or raise prices. Material substitution could help, but it risks reducing quality or performance. Consumers will likely feel the brunt of higher prices for products ranging from appliances to packaged goods. On a larger scale, these pressures may add to inflation, especially in construction and manufacturing, two pillars of the U.S. economy.

Shifting Trade Ties Amid U.S. Tariff Volatility

Tariffs on steel and aluminum may hold up in the short term, mainly because they appeal to voters in key industrial states and are seen to protect American jobs. But from an economic point of view, their impacts are mixed. While they help local metal producers, they also raise costs for industries like auto and construction that rely heavily on these materials. Over time, these added costs can hurt U.S. competitiveness, and without a broader plan to support manufacturing, tariffs alone may not be a sustainable solution.

History shows that tariffs often rise and fall with political changes—like under President McKinley in the 1890s, when high tariffs were rolled back just a few years later, reflecting electoral changes and shifting economic priorities. A similar shift could happen again if a future government takes a more pro-trade approach. Many countries have already started preparing for this uncertainty by reducing their reliance on the U.S. and building local supply chains. As a result, constant changes in U.S. tariff policy may weaken its role as a stable trade partner and speed up moves toward more regional trade deals and supply networks.