The Economic Impact of U.S. Steel and Aluminum Tariffs
- ISCRO MSU
- May 3
- 7 min read
Written by Veena Raigaonkar (Research Lead), Niyathi Manivannan, Andrew Fuller, Ajitesh Venkatesh, Aryahi Pachpande, & Vaishnavi Akella
KEY POINTS:
President Trump’s 25% tariffs on steel and aluminum will adversely impact US consumers and manufacturers through rising prices on imported goods
International trade relations between the US and importing countries are in conflict due to unfavorable tariff terms
Automotive, construction, and manufacturing sectors will take the biggest hits from tariffs
Intro
The recent expansion of U.S. tariffs on steel and aluminum imports represents a significant change in trade policy, with implications for both domestic and international markets. Historically, the U.S. has imported substantial amounts of steel and aluminum from key trading partners, including Canada, the EU, Japan, South Korea, and Mexico. The newly imposed tariffs are set to affect a wide range of industries that depend on these materials, such as construction, automotive, and local manufacturing (NY Times).
International Implications
In 2018, Trump implemented tariffs on steel and aluminum, greatly affecting economies on both ends. To Americans, this can be an incentive for producers to move their production outside of the U.S. However, this led to extreme job loss. Though President Trump’s argued that the US can produce what Canada produces, the Aluminum Association stated that the U.S. cannot produce enough aluminum to meet the demands of citizens alone. Exports of various steel products to the U.S. dipped nearly 40% in 2018. Aluminum exports were cut in half, reaching one of their lowest levels in decades. China, involved in a trade war with the U.S., faced $250 billion in tariffs on goods by 2018, prompting $110 billion in retaliatory tariffs against American exports. Industries such as agriculture, steel, and electronics were hit hard. Tariffs implemented in 2025 are stacking onto those of 2018, meaning that we may see similar outcomes.
Because the tariffs aim to encourage local manufacturing and reduce dependence on imported goods, they will have a significant impact on international trade regarding steel and aluminum. For example, the 2018 tariffs caused an increase in the primarily US aluminum production, which declined sharply in 2019 when the US removed the tariffs on Canadian aluminum imports (as shown below).
The tariffs are expected to hit supply chains across various industries and nations, currently extending to countries that account for 3/4ths of US steel imports by volume.
Since 2018, the US has granted over 100,000 exemptions to importers with limited domestic markets. However, with the expansion to derivative products and removal of such allowances, the value of tariffed goods will reach $72 billion for steel and $132 billion for aluminum (Boston Consulting Group). The change in affected amounts of imported product with the elimination of tariff exemptions is displayed below:
Product | Pre-Tariff Affected Amount (million metric tons) | Post-Tariff Affected Amount (million metric tons) |
Imported Steel | 7 | 26 |
Imported Aluminum | 2.3 | 5.3 |
The figure below displays the value of goods included in the 2018 and 2025 tariffs, based on all imports from 2024 of steel and aluminum products to the United States.
As the top importing countries, the tariffs will primarily target China, Mexico, and Canada. Canada has responded strongly to this measure: the nation’s Finance Minister, Dominic LeBlanc, stated that Canada would place 25% reciprocal tariffs on an additional $20.6 billion US imports, following a “dollar-for-dollar” approach for $12.6 billion worth of steel products and $3 billion worth of aluminum products.
Mexico is also expected to experience severe economic impact from the tariffs, particularly regarding slow domestic demand; Mexican steelmakers will likely struggle to find outlets for manufacturing, resulting in bloated and overflowing inventories. On the other hand, the Chinese state claimed that Japan, Korea, and China will jointly respond to the tariffs. To say the least, the steel and aluminum tariffs have impacted the US’s global partners monumentally.
U.S. Household Impact
The U.S. will likely feel the biggest impact from the tariffs. Steel and aluminum tariffs raise costs for everyday items like canned goods, nails, and cutlery. The hit to these items threatens everyday Americans in not only having to be more conscious of their choices but seeing hits to their wallets on a consistent basis.
However, the impact on everyday items is just the tip of the iceberg. The World Steel Association outlines steel use by sector in the figure below.
Steel tariffs could raise costs for US household construction, primarily concerning apartments and other projects. Rebar, a critical construction component, may also be impacted in pricing as a steel product. The Construction section of the article will provide further information on tariff impact on US construction.
Similar to steel production, Trump's aluminum tariff of 25% on aluminum also threatens to increase prices to American commodities. This includes everyday items such as aluminum foil, cooking utensils, and many common utensils according to USGS.
Aluminum tariffs will hit automotive and construction hardest. Ford’s F-150 uses military-grade aluminum for lightweight durability; Chevy Silverados and others rely on it. Rising aluminum costs will directly increase consumer prices.
Aluminum's automotive utility means higher vehicle costs without production gains, as seen in 2018 tariffs. These issues would be compounded by the cost to repair a vehicle. Increased cost to automotive parts (which utilize steel and aluminum) threaten not only the sticker price, but the price of maintenance as well. The Automotive section of this study will provide more detail on tariff impacts on the automotive industry.
Overall, Trump’s tariffs on steel and aluminum threaten the average American household and their budgets. This may impact smaller ticket items such as everyday household items as outlined by USGS, to larger ticket items such as automotive vehicles and the maintenance for them, to even the construction of many buildings, including apartment complexes, and common city buildings. Ultimately, the American consumer may be hit the hardest due with increasing prices for necessities and luxury goods alike.
Automotive industry
The automotive industry is facing a huge backlash due to the tariffs, directly impacting imported auto parts and materials. With rates tariff reaching 25% for steel and aluminum. In response, companies have shifted their logistics and procurement strategies to adjust to the political climate and manage costs and risks.
Analysts predict that manufacturing costs could increase by around $1,000–$2,000 per vehicle. Accordingly, manufacturers may raise car prices. The auto industry could also see a sudden jump in specific vehicles, particularly Sport utility vehicles; and pickup trucks, due to these vehicles utilizing more metal.
Hyundai’s recent $20 billion investment in United States manufacturing marks a clear shift towards domestic sourcing, with plans to open a steel manufacturing plant in Louisiana to avoid the international tariffs. Though the company had already initiated these plans long before the tariffs, this strategy may allow Hyundai to mitigate tariff-related costs while establishing tighter control over its supply chain. Additionally, this initiative is expected to boost the region's economy, with estimates suggesting that 1,400 to 10,000 new jobs will be created by Hyundai's investment.
Across the industry, 44% of manufacturing executives are reconsidering their procurement processes. The idea of long-term contracts for steel and aluminum is increasingly favored, in preparation of future tariff spikes. Tier 2 and 3 suppliers are experiencing the most strain as the concept of dual and triple sourcing strategies is gaining popularity to reduce reliance on a single supplier or region for goods. Utilizing these strategies, companies are proposing health checks to ensure that tariff-related cost increases do not lead to product delivery failures.
The costs arising from the tariffs on automakers are being passed on to suppliers and consumers. Sources report that 50-70% of tariff-related costs will directly affect the average vehicle buyer. As tariff-related news becomes more relevant, large automakers' stocks have also seen a significant plummet in value.
Companies' Stock Prices have taken a huge margin drop, due to the implications of the tariffs and overall political climate. As seen in the graph we can see that big automakers have seen direct impact on their future company stock evaluations.
Whether it advocates for more domestic investment or pushes firms to implement new sourcing strategies, the automobile industry is projected to change in large margins soon.
Construction
Prices of steel and aluminum for construction materials are expected to increase significantly from the 2025 tariffs. Consumers will be affected the most to compensate for the higher material costs through the rise in housing and infrastructure pricing (ConstructionDive). Consequently, the demand for building commercial buildings and houses may decrease significantly assuming all other things remain equal. For projects that started construction before the tariffs were implemented, contractors may have to bear the cost, due to money not being earned back, resulting in a loss for companies. Furthermore, though moving to domestic aluminum and steel suppliers may reduce foreign competition, it may slow down production due to supply shortages because production will not be able to meet capacity.
Currently, contractors depend on about ⅓ of international steel shipments face rising costs for materials like rebar and post-tension cables, hurting small contractors’ ability to plan large projects. The U.S. imports 70% of its tin mill steel; earlier tariffs had led to the closure of 9 tin mill lines, only 3 remain. This could lead to even higher prices and also create uncertainty in the market because it will be harder for contractors to plan the timeline of completing projects. (CFR)
Additionally, job opportunities in construction may decline due to less projects, higher cost of materials, and not enough money to compensate workers.
The figure shows that construction is the top industry in demand for iron and steel, with steel making up for 28% of net shipments. The construction industry is the largest consumer when compared to other sectors, meaning that it will also take a major hit due to the demand for steel that is needed to complete projects. Infrastructure development, real estate, and residential building projects demand much more steel compared to other industries. Steel is a key factor in this industry and domestic production will not be sufficient enough to meet the demands of everything that needs to be built.
Manufacturing
The tariffs will also impact manufacturing, having been expanded to include finished items like screws and bolts, pushing up material costs. The figure below shows the products most affected.
Many U.S. companies can’t find enough domestic suppliers to replace imports for steel cable, rebar, and nails, which have gone up 4–8%. Simultaneously, companies state that their customers will not tolerate price increases. As a result, some developers and manufacturers are delaying or canceling projects, which could lead to a slowdown in manufacturing (WSJ).
Tesla warns tariffs will hurt profits, and Detroit automakers may face higher costs as domestic supply tightens. Appliance prices are rising too Abt, a family-owned appliance and consumer electronics store in Glenview, Illinois, reported a 10–15% increase on espresso makers and toasters. The Retail Industry Leaders Association noted tariffs on household goods like grills and pushpins could lead to duties up to 75%. Aluminum can makers, using over 100 billion cans annually, will pay more, with small brewers especially impacted. The Brewers Association says 10% of cans use Canadian aluminum. While Molson Coors shifted to U.S. aluminum, others like Coca-Cola may switch to plastic. The Aerospace Industries Association warns tariffs could strain an already stressed supply chain, risking delays and higher costs in aviation manufacturing. Overall, the tariffs are increasing costs and uncertainty across U.S. manufacturing (Time).
Conclusion
While President Trump’s 2025 tariffs on steel and aluminum attempt to eliminate companies’ dependence on imported goods, US consumers may take on the adverse impacts of rising prices and concentrated demand. International relations with Canada, Mexico, and China maintain uncertainty and conflict from the US’s bold economic move. The automotive, construction, and manufacturing industries may likely experience severe backlash and may struggle to recuperate operations.
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