US Tariffs on Steel and Aluminium: Procurement Challenges

President Donald Trump’s proposed 25% import tax on all steel and aluminium entering the US is set to take effect on 12 March. In addition, new regulations will redefine what qualifies as domestically produced steel and aluminium, requiring steel to be “melted and poured” and aluminium to be “smelted and cast” within the US.

These measures aim to prevent low-cost imports from nations like China and Russia via intermediary countries.

The proposed tariffs have sparked concern both within the US and globally, especially given how heavily American manufacturers rely on imported aluminium from countries like Canada and Mexico. Trump insists the move is necessary to reinvigorate US manufacturing, declaring: “Our nation requires steel and aluminium to be made in America, not in foreign lands.”

However, doubts persist. With Trump recently halting tariffs on Mexican and Canadian imports, industry observers speculate that the move is more of a negotiation tactic than a firm commitment.

The pause came after Mexico and Canada reaffirmed their existing agreement to station troops at their borders—an arrangement initially made under the Biden administration. This casts uncertainty over whether the tariffs will actually be implemented.

Stephen Moore of the Heritage Foundation, a former senior economic adviser to Trump and author of Trumponomics, suggests these tariffs may be part of a broader trade strategy. “Just about everything Donald Trump does in Washington is a negotiating tactic,” he says.

Yet, if these tariffs are more than just a bargaining tool, they are set to reshape global procurement strategies and disrupt supply chains across multiple industries.

Procurement challenges for US manufacturers

While steel tariffs have been welcomed by American steelmakers, aluminium presents a different challenge. The share prices of US steel firms, such as Cleveland-Cliffs, have soared nearly 20% since the announcement.

The US is the world’s third-largest producer of raw steel, following China and India, ranks sixth in pig iron production. In 2024, the industry produced over 74 million net tons of steel, with forecasts suggesting further growth.

These tariffs could provide US steel producers with a competitive edge, reducing reliance on foreign imports and potentially creating jobs. However, aluminium presents a stark contrast.

Aluminium is essential to industries including automotive, aerospace, defence and construction. Yet, the US is highly dependent on imports, with nearly 50% of its aluminium supply coming from abroad—primarily from Canada. In 2024 alone, Canadian aluminium exports to the US totalled 3.2 million tons, more than double the combined amount from the next nine largest suppliers.

If tariffs proceed, procurement professionals will face higher costs and supply shortages, impacting everything from consumer electronics to large-scale infrastructure projects. The long-term effects could include industry contraction, job losses and delays in major developments.

Rob Shaw, GM EMEA at Fluent Commerce, warns that imposing tariffs could trigger retaliatory measures from other nations, further complicating global supply chains.

“Since the announcement from President Trump threatening tariffs on global imports, the trade market can only be described as an unstable, ever-changing state,” he says.

“If the US does proceed with imposing tariffs, other countries will retaliate, as we’ve already seen with China. In this scenario, tariffs may be imposed in the opposite direction, raising costs within the supply chain.

"Ultimately, it’s consumers who will bear the brunt of these changes. To protect their profit margins, businesses will inevitably pass on higher costs, placing additional financial strain on buyers already struggling with economic pressures.

"The exception is the luxury goods market, where high-income consumers will be able to absorb the additional costs.”

Global trade and procurement implications

The long-term success of Trump’s tariffs will hinge on the US’s ability to scale up domestic production of both steel and aluminium while maintaining competitive pricing. While the US steel sector is relatively self-sufficient, aluminium is another matter entirely. Increasing domestic capacity will require significant investment and could take years to materialise.

The global procurement landscape will also shift, as nations react to the US’s protectionist policies. China and Canada, both dominant players in aluminium production, are unlikely to sit idly by.

Trump’s administration has repeatedly clashed with both nations, accusing China of fuelling the opioid crisis and even suggesting Canada should become a 51st US state. These tensions make retaliatory tariffs almost inevitable.

For procurement leaders, this creates uncertainty. Many manufacturers rely on long-term supplier agreements, stable pricing structures and just-in-time inventory models.

Disruptions caused by tariffs could force businesses to re-evaluate their sourcing strategies, potentially driving investment in alternative supply chains or domestic production—though at a higher cost.

The global manufacturing sector has evolved far beyond the era when nations could operate independently. Today’s supply chains span continents, relying on seamless integration between multiple regions. A return to protectionist policies may offer short-term gains for some US industries but could ultimately weaken America’s competitive position in global trade.

To maintain procurement efficiency, businesses must now consider contingency plans. Whether through diversifying suppliers, reshoring certain production elements or exploring alternative materials, adaptation will be key to navigating the uncertain landscape ahead.

Could the US strengthen its manufacturing base by imposing steel and aluminium tariffs? Perhaps.

But the costs — both financially and strategically — may outweigh the benefits, as tariffs continue to push international trade attention towards China.

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