US Imposes 25% Tariffs on aluminium and steel, Sending Shockwaves Through Global Trade

On 9 February, the US government announced a 25% tariff on all imports of aluminium and steel, set to take effect on 12 March, while potential levies on copper remain under discussion. The decision, aimed at protecting domestic manufacturing, has rattled global markets, impacting industries and traders worldwide.

Unlike previous measures, these new tariffs apply universally, with no exemptions or exceptions, marking a significant escalation in US protectionism. This move is expected to increase costs, disrupt supply chains, and intensify global trade tensions, as some countries may retaliate by imposing reciprocal tariffs on US products. For instance, the European Commission, announced on 10 February that it would respond to protect EU interests if US tariffs will enter into force.

Key Points

• Tariff Scope: The tariffs cover both semi-finished and finished steel and aluminium products, strengthening enforcement measures, and closing transhipment loopholes that previously allowed certain countries to bypass duties by rerouting metals through third-party countries, such as Vietnam and Mexico.
• Global Response: Countries like Japan and Australia are seeking exemptions, while the UK steel sector warns of major trade distortions. China’s Foreign Ministry urged the US to “correct its erroneous approach and stop politicising and weaponizing economic and trade issues" and called for dialogue on Monday, 10 February.

Aluminium Price Movements

• US Metal Premiums Surge: The Midwest aluminium premium jumped approximately 15.9% on Monday 03 February to $628/mt, reflecting growing supply concerns ahead of the tariffs.
• LME Aluminium Dropped: As of 12 February, having reached a 3-week high earlier in the week, LME Aluminium prices declined as concerns over demand grew.

Industry Reactions & Concerns

• Trade and Market Disruptions: UK steel leaders argue the tariffs will distort global trade flows rather than address overproduction issues. Furthermore, analysts note that higher US metal premiums stem from supply fears, not increased demand.
• Higher Costs for Key Industries: Pricing of raw materials and compliance burdens are set to increase in sectors including automotive, construction, and aerospace.
• US Metals More Expensive Than Their European Counterparts: As traders in the US stockpile metals ahead of the tariff deadline, US prices push higher, increasing the price difference with EU metals.
• Uncertainty & Hesitation: Many businesses are waiting for further clarity on potential exemptions before making investment decisions.

Conclusion

The 25% tariffs mark a turning point in US trade policy, bringing higher costs, supply chain disruptions, and increased regulatory scrutiny. To stay competitive, businesses must diversify suppliers, optimize logistics, and adapt pricing strategies.

While prices may stabilize, uncertainty remains high, and the long-term impact on global trade could be significant.

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