What's The Impact of U.S. Aluminum And Steel Tariff Increases in 2025?

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What's The Impact of U.S. Aluminum And Steel Tariff Increases in 2025?

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What's the Impact of U.S. Aluminum and Steel Tariff Increases in 2025?

In 2025, the U.S. will raise tariffs on steel and aluminum imports by 25% (the original aluminum tariff will rise from 10% to 25%), eliminate allied exemptions and extend to steel and aluminum derivatives, which will have a multi-dimensional impact on the global economy and the U.S. itself:

I. U.S. Domestic Impact: Short-term Industrial Pain and Long-term Economic Risks

Soaring costs in downstream industries

Automotive and aerospace:

The cost of a single car has increased by more than US$1,000, and the budgets of military projects such as the F-35 fighter jet have been overspent; aluminum accounts for 80% of the weight of an aircraft's fuselage, and high-purity aluminum relies on imports from Canada, which has pushed up the cost of manufacturing and maintenance.

Consumer Goods and SMEs:

Price increases for aluminum cans (Coca-Cola), appliances, medical devices, caskets, fishing gear, etc.; small craft breweries are on the verge of losing money due to the rising cost of aluminum cans.
Energy & Infrastructure: Shale oil companies are losing competitiveness in energy exports due to surging import costs of specialty steel; rising costs of raw materials (rebar, aluminum) in the construction industry are driving up residential and commercial construction costs.

Inflationary and Employment Pressures:

Inflationary pressures intensified as the U.S. CPI rose 2.8% year-over-year in February, involving more than $150 billion in imports (289 categories).
Short-term job creation in the steel industry (e.g., 14,000 in 2018), but more job losses in downstream manufacturing (automotive, machinery, etc.) (75,000 in 2018), with a negative net employment effect. The Peterson Institute for International Economics calculates that each steel job saved costs taxpayers $900,000 per year.

Industry competitiveness and supply chain woes:

Insufficient local steel and aluminum capacity (U.S. aluminum production is only 1% of global production), unchanged dependence on imports, and downstream companies forced to raise prices or restructure supply chains (e.g., shift to Southeast Asia), but at risk from new tariffs.
High energy costs (Alcoa's electricity costs $36/MWh, far exceeding Canada's hydroelectric advantage), old technology and equipment, with some companies (e.g., Missouri aluminum plants) shutting down again due to cost pressures.

II. International response: allied countermeasures and the reconfiguration of global trade patterns

Retaliatory measures by allies

Canada:

As the largest supplier of steel and aluminum to the U.S. (accounting for more than 25% of imports), it was hit with 50% total tariffs, announced reciprocal tariffs on $29.8 billion of U.S. goods (steel, computers, sports equipment), and suspended surcharges on some U.S. electricity exports.

EU:

tariffs on €26 billion of U.S. goods (alcohol, textiles, appliances) from April 1, criticizing the U.S. for “disrupting supply chains and jobs.”

Other countries:

Australia unsuccessfully sought exemptions; South Korea and Japan's steel exports were hit (South Korea's exports to the U.S. accounted for 9.8% of its total) and shifted to Southeast Asia for re-export; Brazilian and Mexican supply chains came under pressure, with Brazil's vice president calling the U.S. initiative “wrong and damaging to global trade.”

Multilateral trading system damaged

Allies accuse US unilateralism of undermining trade partnerships, with Canada's foreign minister saying “there are no winners in a trade war”. the WTO had ruled that the 2018 steel and aluminum tariffs were in violation of the law, but the US continues to escalate the measures, undermining the authority of multilateral rules.
Accelerated reconstruction of the global supply chain: Canadian aluminum companies shifted to the EU leading to its oversupply, and the EU carbon border mechanism (coming into effect in 2026) further impacted the aluminum industry in high-carbon emitting countries (e.g., Brazil); companies accelerated the regionalization of their layout to reduce their reliance on the US.

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