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On February 10, 2025, President Trump placed 25% tariffs on all steel and aluminum imports, representing nearly $60b in value, reinforcing his administration’s commitment to increasing domestic production. The tariffs apply broadly across all foreign suppliers, including Canada, Mexico, China and the EU.
This policy covers both raw metals and finished products and is intended to prevent transshipment and tariff evasion. The new tariffs are scheduled to go into effect March 12.
The administration is expanding steel and aluminum tariffs under Section 232 of the Trade Expansion Act, citing national security concerns. This legal authority, which Trump used in 2018, allows the president to restrict imports to safeguard critical domestic industries.
The White House argues that restricting foreign metal imports is critical to protecting US production capacity and preventing unfair trade practices. The administration has set an 80% capacity utilization target for domestic production, much higher than the current 70% rate for iron and steel products. However, alumina and aluminum capacity utilization is already at 83%, meaning that further domestic demand pressures could strain capacity, potentially driving up costs.
The new tariffs go further than the 2018 measures, which primarily targeted raw steel and aluminum, by covering a broader range of finished metal products. The administration is also tightening enforcement and closing transshipment loopholes that allowed some countries to reroute metals via third-party economies to evade duties.
Another key distinction is the tariff rate itself. In 2018, aluminum faced a 10% tariff, while steel was hit with a 25% duty. The newly announced rate is 25% for both steel and aluminum, and it will be layered onto existing trade restrictions, including a 10% tariff on all imports from China and the (currently paused) 25% tariffs on Canada and Mexico. This expands the scope of trade barriers, and is likely to make foreign sourcing more expensive across multiple industries.
The new tariffs apply universally, with no automatic exemptions, even for Canada and Mexico, which previously secured relief. Unlike in 2018, when the US permanently exempted Australia and applied import quotas for Brazil, South Korea and Argentina, this round offers no broad carveouts.
At the same time, while past deals replaced some steel and aluminum tariffs with tariff rate quotas (TRQs) for the EU, UK and Japan, no similar arrangements have been announced this time. As a result, all imports will face the full tariff rate unless explicitly exempted at a later date, adding to supply chain uncertainty and forcing businesses to rethink procurement and cost-cutting strategies.
Case-by-case exemptions and product exclusions may still be available, but with a stricter approval process, businesses should expect fewer opportunities for relief. Additionally, product-specific exclusions granted under Biden and the first Trump administration are eliminated, at least for now.
The new tariffs on steel and aluminum will have widespread global consequences, but Canada is most affected. The country supplies 50% of US aluminum imports ($9.4b) and 20% of US steel imports ($7.7b), making it the most exposed trading partner under this policy shift.
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Read moreFor aluminum, beyond Canada, the UAE, South Korea, Bahrain and China — which each account for 3%–6% of US imports — will also feel impacts. Brazil, India, Argentina and Mexico are smaller players in the aluminum trade, but could still face supply chain disruptions as buyers adjust sourcing strategies.
On the steel front, Brazil ($6.4b, 17% share) and Mexico ($3.7b, 10% share) will be most impacted after Canada. South Korea, Germany and Japan — each supplying 5%–8% of US steel imports — will also see significant cost pressures. Meanwhile, China Mainland, Taiwan and Vietnam play smaller but still notable roles, with each accounting for 2%–4% of US steel imports.
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Read moreThe European Union, exporting $7.3b in steel to the US (roughly 19% of US imports) and about $1.4b of aluminum (roughly 8% of US imports), could push back diplomatically and with retaliatory tariffs of its own, as it has in past trade disputes. Other countries also may retaliate.
The tariffs on nearly $60b of imports will drive up the price of imported steel and aluminum, though the exact impact depends on any future exemptions, exclusions, and whether foreign producers absorb some costs. Higher import costs will shift demand toward US producers, boosting domestic output, but supply constraints could push prices even higher.
Still, since these tariffs will only impact 1.5% of US imports, the macroeconomic consequence will likely be marginal.
For the US, we estimate the impact to be a loss of less than 0.1% of GDP, relative to our baseline, by 2026, assuming that no future exemptions or product exclusions are applied and that there is proportional retaliation from trading partners. Since it seems likely that at least some exemptions and exclusions will occur and that retaliation may be less than proportional, the final GDP loss will likely end up being smaller. The impact on inflation would be similarly minimal. For Mexico, China and the EU, the cumulative impact would be a loss of less than 0.1% of GDP relative to our baseline, while for Canada the impact could peak at 0.2% in 2026.
Industries heavily dependent on steel and aluminum — including automakers, construction firms and manufacturers — are likely to see rising input costs. Some companies may absorb the hit, squeezing profit margins, while others will pass it on to consumers, driving up prices for finished goods. If costs rise too sharply, demand for downstream products could weaken, slowing production and job growth in affected sectors.
Beyond immediate cost pressures, uncertainty around trade policy could weigh on business investment, especially for companies with global supply chains. While domestic steel and aluminum producers may benefit, the broader manufacturing sector faces mounting cost pressures that could slow growth and competitiveness.
To offset these challenges, businesses will adjust their strategies. Some will diversify supply chains, shifting sourcing to countries less impacted by the tariffs, while others may invest in automation to cut costs and reduce dependence on imports. Meanwhile, lobbying for exemptions will likely ramp up, particularly among industries with few viable domestic alternatives.
The views reflected in this article are the views of the author(s) and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.
