On June 4, 2025, President Trump announced a dramatic increase in tariffs on steel and aluminum imports, doubling them to 50% under Section 232. The move aims to protect U.S. industry and reduce dependence on foreign metals. Canada and Mexico, key trade partners, have pushed back, while aluminum prices and global tensions soar. This article unpacks the policy shift, economic implications, and industry responses.
In a continued escalation of the administration’s protectionist trade agenda, President Donald J. Trump signed a proclamation doubling tariffs on most imported steel and aluminum to 50%. Effective immediately, the measure aims to reinforce domestic manufacturing and reduce reliance on foreign metals under national security considerations. The United Kingdom, however, retains a temporary exemption under a preliminary trade agreement, keeping its tariffs at 25%.
Background on Steel and Aluminum Tariffs
The United States has a history of using tariffs to protect its steel and aluminum industries, which are considered critical for national security, infrastructure, and manufacturing. Under Section 232 of the Trade Expansion Act of 1962, the President can impose tariffs on imports deemed a threat to national security. In 2018, during his first term, President Trump introduced tariffs of 25% on steel and 10% on aluminum imports, with exemptions for key allies like Canada, Mexico, and the European Union. These exemptions, along with quotas and trade agreements, allowed certain countries to avoid or reduce duties.
However, these exemptions led to challenges. A 2023 report by the U.S. International Trade Commission noted that high import volumes from exempt countries, combined with global overcapacity—particularly from China—depressed domestic production. U.S. steel capacity utilization fell from 80% in 2021 to 75.3% in 2023, while aluminum capacity utilization dropped from 61% in 2019 to 55% in 2023. To address these issues, Trump reinstated and expanded tariffs in February 2025, setting a uniform 25% rate on all steel and aluminum imports starting March 12, 2025, eliminating all prior exemptions. The June 4, 2025, proclamation further escalated these tariffs to 50%, except for the UK, signaling a tougher stance on global trade.
Details of the Tariff Increase
Effective June 4, 2025, the tariff on steel and aluminum imports was raised from 25% to 50%, as announced in a White House proclamation. This increase applies to raw steel and aluminum, as well as derivative products like nails, screws, automotive parts, and construction materials. The tariffs are imposed under Section 232, with the stated goal of protecting U.S. industries from unfair trade practices and global overcapacity, particularly from China, which produced 114 million metric tons of steel in 2024, contributing to a projected global overcapacity of 630 million metric tons by 2026, according to the OECD.
The UK is the only country exempt from the 50% tariff, maintaining a 25% rate due to the U.S.-UK Economic Prosperity Deal signed on May 8, 2025. This agreement may lead to further adjustments or quotas starting July 9, 2025, depending on ongoing negotiations. To ensure compliance, the U.S. Department of Commerce has introduced strict reporting requirements for steel and aluminum content in imported products, with penalties like fines or loss of import rights for false declarations. Additionally, no duty drawback is allowed, meaning importers cannot recover paid duties on re-exported goods, and foreign trade zones are subject to the same tariff rates upon entry into U.S. commerce.
Impact on Canada and Mexico
Canada and Mexico, the United States’ largest trading partners under the U.S.-Mexico-Canada Agreement (USMCA), are the most affected by the tariff increase. In 2024, Canada supplied 79% of U.S. primary aluminum imports and was the top source of steel imports, followed by Mexico and Brazil. The $147.3 billion worth of imported steel and aluminum products in 2024 included $25 billion in aluminum automotive components and $15 billion in metal furniture, with Canada and Mexico as primary suppliers.
The 50% tariff is expected to significantly disrupt these supply chains. Canadian officials, including Prime Minister Mark Carney and Innovation Minister Francois-Philippe Champagne, have called the tariffs “unjustified” and an “attack on Canadian workers.” Canada has announced retaliatory tariffs worth CAD $29.8 billion on U.S. goods, including metals, computers, and sporting goods, effective March 13, 2025. Mexico, while facing similar pressures, has secured temporary exemptions for USMCA-compliant goods, though these are under review as of April 2, 2025.
The United Steelworkers union in Canada warned that the tariffs threaten thousands of jobs in communities reliant on steel and aluminum production. Ontario Premier Doug Ford, after negotiations with U.S. Commerce Secretary Howard Lutnick, avoided an earlier threat of 50% tariffs on Canadian metals in March 2025 by suspending a 25% surcharge on electricity exports to the U.S. However, the current 50% tariff remains a significant challenge for Canadian and Mexican exporters, potentially reducing their competitiveness in the U.S. market.
Surge in Aluminum Prices
The tariffs have driven a dramatic increase in aluminum prices, with import premiums in the U.S. physical market soaring to a record high of over $990 per metric ton in 2025, more than doubling from earlier levels. This surge reflects the increased cost of importing aluminum, which is passed on to U.S. importers and, ultimately, consumers. Industries reliant on aluminum, such as automotive, construction, and beverage can manufacturing, face higher production costs. For example, S&P Global Mobility estimates that the tariffs could add $6,250 to the average $25,000 price of a car imported from Canada or Mexico.
The price increase is compounded by the lack of exemptions for specialized aluminum products not readily available domestically. Unlike the 2018 tariffs, which allowed exclusion requests for products unavailable in the U.S., the 2025 tariffs offer no such relief. This has raised concerns among manufacturers, with companies like Husco in Wisconsin reporting cost increases for imported machined steel and aluminum components, potentially leading to price hikes for consumers.
Domestic Production Outlook
The primary goal of the tariffs is to revitalize U.S. steel and aluminum industries by encouraging domestic production and achieving a sustainable capacity utilization rate of at least 80%. During Trump’s first term, the 2018 tariffs led to a temporary boost, with steel production increasing by 6 million metric tons and aluminum output by 350,000 metric tons between 2017 and 2019. Over $10 billion was invested in new U.S. steel mills, and companies like Hyundai Steel are now considering building plants in the U.S.
However, domestic production is not expected to increase immediately. Expanding capacity requires significant time, capital, and infrastructure, particularly for aluminum, which demands substantial electricity for smelting. William Hauk, a professor of economics at the University of South Carolina, noted that the high cost and limited availability of electricity remain significant barriers. As a result, import volumes are likely to remain steady unless higher prices reduce demand. The U.S. Chamber of Commerce has warned that the tariffs, by raising input costs, could reduce the global competitiveness of U.S. manufacturers, potentially offsetting gains in domestic production.
Economic and Trade Implications
The tariff increase has sparked concerns about broader economic impacts. Economists, including Felix Tintelnot of Duke University, argue that the policy could harm U.S. businesses by raising costs for domestic manufacturers, particularly in the automotive and construction sectors. The Tax Foundation estimates that the tariffs could result in an average tax increase of $1,200 per U.S. household in 2025, contributing to inflationary pressures. Deutsche Bank economists project that the tariffs could boost the core personal consumption expenditures price index by 0.4 percentage points.
Global trade tensions have also escalated, with the European Union imposing retaliatory tariffs on $28 billion worth of U.S. goods, including motorcycles, bourbon, and agricultural products. While the EU delayed its 50% tariff retaliation until July 9, 2025, to allow for negotiations, other countries like South Korea and Japan are also seeking to minimize the impact on their steel industries. The uncertainty surrounding these tariffs has led to stock market volatility, with shares in U.S. automakers like Ford and Stellantis dropping after the tariff announcement.
Mitigation Strategies for Businesses
U.S. businesses reliant on imported steel and aluminum must adapt to the new tariff landscape. Strategies include:
-
Sourcing Alternatives: Exploring suppliers from non-tariffed markets or increasing reliance on domestic producers.
-
Contract Renegotiation: Adjusting supplier contracts to share cost increases or passing costs to consumers through price adjustments.
-
Customs Compliance: Ensuring accurate customs classifications to avoid penalties, as the U.S. Department of Commerce is cracking down on misclassification.
-
USMCA Utilization: Leveraging USMCA provisions for potential tariff relief, where applicable, for Canadian and Mexican imports.
The 50% tariffs on steel and aluminum imports mark a significant escalation in U.S. trade policy under President Trump. Aimed at protecting domestic industries and national security, the tariffs have profound implications for Canada and Mexico, driving up aluminum prices and challenging U.S. manufacturers with higher costs. While domestic production may benefit in the long term, immediate increases are unlikely, and the policy risks inflation and trade retaliation. Businesses must navigate this complex landscape with strategic planning to mitigate costs and maintain competitiveness. As global trade dynamics evolve, the long-term effects of these tariffs will continue to shape the U.S. economy and its relationships with trading partners.