This short note aims to decipher a striking graph related to current economic events. US President Donald Trump has announced that tariffs will rise to 25% on all steel and aluminum imports as of March 12, 2025. This Killer Chart identifies the economies most affected by this measure and provides a brief assessment of the potential global repercussions.
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Why is this interesting?
This announcement is historic in that it affects all of the United States’ import partners. In 2017, when the United States raised tariffs to 10% on aluminum and 25% on steel, certain countries were granted exemptions (notably Australia, Brazil, Canada, and Mexico), and the objective seemed to be more about protecting against Chinese imports.
Despite the impressive reduction in Chinese steel imports, the US steel industry has not recovered. For example, capacity utilization in the primary metal processing industry remains low and well below its historical average, and import volumes have continued to grow. The United States is therefore clearly targeting countries with which it has a large trade deficit (see bars on the Killer Chart), notably its Canadian neighbor and the European Union (EU).
Canada will clearly be affected by these tariffs, as the US accounts for 87% of its steel and aluminum exports (see blue dots on the Killer Chart), as will Brazil, with 28% of its exports (mainly steel). Although the US imports large volumes of steel from Germany and South Korea, and aluminum from China and the United Arab Emirates, these countries are less dependent on the American giant (between 4% and 16%).
What are we to make of this?
The US measures are unlikely to go unanswered and will probably prompt retaliation from its trading partners. This seems to be the path taken by the EU, where countermeasures are being discussed (on US imports of vehicles and beverages), as well as by Canada. At this stage, it is difficult to conclude whether these measures will lead to a global rise in protectionism or to new rounds of bilateral negotiations, as was the case between the EU and the US in 2018. Depending on the degree of « retaliation » and its consequences, inflation trajectories will vary significantly.
Mechan ically, customs duties will lead to inflationary pressures: either through the impact of customs barriers on producer prices, or through higher domestic metal prices in a context of reduced imports. Several sectors would thus be directly affected: automotive, construction, shipbuilding, defense, etc. The impact would appear to be less significant for steel, as the country has production capacity that would limit the effect on prices of a reduction in foreign supplies. On the other hand, for aluminum, current and future production capacity remains limited and dependence on imports is very high, suggesting that the price gap between the price in the United States and on international markets could widen.
Globally, the inflationary impact is ambiguous. With its outlets on the US market becoming constrained, China has tended to dump its excess steel and aluminum production capacity on the rest of the world[7]. Whether this is a strategy to reorganize value chains or to seek market share, this dumping has ultimately led to a downward trend in aluminum prices[8]. This can be explained by downward pressure: i) direct pressure via aggressive Chinese dumping, ii) indirect pressure via an increase in global production, with the main producers tending to produce more and export larger volumes in order to maintain their revenues[9]. The quest for alternative market share in the US by certain countries[10] could lead to downward pressure on prices. Another disinflationary factor is that if the global rise in tariffs is followed by a sharper-than-expected slowdown in activity, especially in China and the United States, demand for metals could decline, leading to a fall in global prices.
On the other hand, there is a more inflationary scenario in the event of a global rise in tariffs. This could be the case for countries that raise their tariffs, fearing that the price competitiveness of their domestic steel or aluminum production will be threatened by an influx of cheap foreign products. The EU could adopt this type of reflex, following the example of emerging economies (see the cases of Turkey and Brazil in response to Chinese steel).
The widening US trade deficit on other goods (chemicals and pharmaceuticals, automobiles, and industrial machinery and equipment[11]) suggests that the United States is preparing further measures. Trump has notably mentioned the application of « reciprocal tariffs, »which could mark another decisive move in his term. These tariffs probably raise the broader question of the relevance and viability of the World Trade Organization’s international agreements.
Article written on February 11, 2024
[1] In the first half of the 2010s, Chinese steel exports to the United States averaged more than $1.7 billion, compared with nearly half that amount on average over the period 2019-2023.
[2] A TUC of 68% in Q4 2024, compared to an average TUC of 75% over the last 25 years and 80% over the last quarter of the last century.
[3] The producer price index (PPI) for mill-shaped aluminum rose by +4.5% year-on-year in the second half of 2024, but the PPI for steel fell by -11.7% over the same period.
[4] According to the American Iron & Steel Institute, steel imports accounted for a quarter of US consumption in 2023.
[5] According to JP Morgan, « in the packaging, construction, and transportation sectors, net imports account for approximately 82% of US demand. »
[6] This phenomenon can already be observed in the very short term, with a 25% increase in this gap between February 7 and 11, 2025.
[7] Chinese steel imports have exploded since 2018 in Brazil, India, Turkey, and ASEAN5. This observation is less obvious for aluminum, as exports to the United States have remained strong, but Chinese aluminum imports have also increased significantly in Asia.
[8] This decline can be seen over the period June 2018-December 2019 (-21%) and also over the period from March 2022 until the US elections in 2024 (-27%).
[9] The underlying idea for non-Chinese producers is to increase the volume of production for export, so that this « positive » volume effect offsets the « negative » price effect (induced by Chinese dumping, which weighs on international prices) and allows margins to be maintained.
[10] Among the most competitive exporters are: for aluminum, the UAE and India, for example; for steel, Brazil, Indonesia, and South Korea, for example.
[11] The US trade deficit for chemicals and pharmaceuticals rose from -$11.6 billion between 2009 and 2013 to -$111.9 billion between 2019 and 2023, and from -$82.6 billion to $208.3 billion for industrial machinery and equipment, and from -$92.6 billion to -$181.5 billion for automobiles.
[12] Currently, the weighted average customs duty rate in the United States vis-à-vis the rest of the world is 2.2% (10% with China) according to the World Trade Organization. This level is certainly close to that applied by France or Germany (2.7%), but significantly lower than the average rate applied by Vietnam (5.1%), Brazil (6.7%) or India (12%). Reciprocity would imply an upward adjustment of the rate, posing a very serious threat to exports from countries with the highest rates.
