CreditSights questions impact on steel demand following implementation of 25% tariff by the US
US President Donald Trump has implemented a 25% tariff on all steel and aluminium imports into the US, with indications that this will be long term, CreditSights indicates in a report on its outlook for tariffs on metals.
The report notes that the tariffs are partly motivated by the desire to support domestic steel manufacturers in the US.
While tariffs might reduce supply and increase prices, the primary concern is their impact on demand, CreditSights notes, pointing out that demand was sluggish in the first half of 2024 and into the first quarter of this year, with the industry attributing this to election uncertainty and now seasonality.
With rising steel prices and the US Federal Reserve being less likely to cut rates, CreditSights questions what impact this is likely to have on demand from rate-sensitive end markets such as construction and automotive.
The report, meanwhile, also cites sources that posit that steelmakers with operations in Canada and Mexico could benefit from tariffs, as rising steel prices may offset increased costs.
Further, CreditSights says the rationale for aluminium tariffs is less clear, given that it is a less prominent sector in the US.
It points out that the Aluminum Association (AA) has been scaling back capacity in the US over the years, and it is unclear whether it will restart capacity even at higher price points.
About half of all aluminium is imported, with two-thirds coming from Cananda, which boasts cheaper electricity required for production.
Higher tariffs could lead AA to redirect its Canadian aluminium to European markets, impacting on supply chains, the report warns.
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