Slow-Burn Dangers Of Trump´s Trade War
The chaotic manner in which the US President, Donald Trump, has prosecuted his global trade war in recent months has had many obvious effects. His fluctuating and exaggerated tariff rates have caused confusion and dismay in equal measure. However, aside from the initial impact, there is growing evidence that a less-obvious, slow-burn, negative sentiment has begun to permeate all sections of the steel industry. To take the US aluminium sector, as indicative. On June 3, Trump signed an executive order doubling to 50% the tariffs on aluminium imports into the US from all origins. In the following month of July, US inflows of primary aluminium fell by 40%, according to the International Trade Administration’s Aluminium Import Monitor. Australia is a modest importer of aluminium to the US, while Canada accounts for 70% of inflows. Trump´s barriers to entry are designed to encourage domestic production, but they may eventually have precisely the opposite effect: by causing “demand destruction”.
“I think demand destruction is concerning,” Molly Beerman, CFO of Alcoa, said at a June 17 conference in New York. “Initially, we’re not seeing the destruction. However, if it lasts longer, we do worry that inflation will work its way in and producers will not be able to offset the higher costs at the 50% tariff level. Eventually, that will result in higher prices to the end consumers,” she said. April Soriano is an aluminium analyst at S&P Global Commodity Insights. She told Platts that a tariff-driven dip in US demand for aluminium is possible across all three of aluminium’s major end-consumer sectors. “We understand there have still been recent pockets of strength in the can sheet and automotive sectors, but if high tariffs remain in place, the impact on consumption from the construction, transport and packaging sectors is expected to be more pronounced in the second half of the year,” she said. “Major users of aluminium packaging, for instance, have said they might move away from aluminium to plastic bottles and cartons”. Joe Quinn is executive director for the SAFE Center for Strategic Industrial Materials. He told Platts: “The tariffs went from 10% to 25% to 50% in three months. And if it stays at the 50% mark, yes, that will generate revenue for some aluminium producers, but prices that high, there’s a legitimate fear of demand destruction. Customers may go to different materials”. Meantime, aluminium´s cousin, the flat steel industry, may be about to have its own problems. The big three carmakers – General Motors, Ford and Stellantis – have announced they will take a combined earnings hit from tariffs in 2025 of US $7 billion. That´s a lot of flat steel which may not be purchased: this year and into the future
On August 1, Trump´s latest round of `reciprocal´ tariffs came into force. They were a mix of punishments and appeasements. The rate applied to Canada´s exports to the US went from 25% to 35% and the threat was made that any recognition of the Palestinian state by Canada would put the current trade talks in jeopardy. India, which is emerging as a steel producing powerhouse, was told its purchase of oil and weapons from Russia would no longer go unpunished. India´s tariff rate was set at 25%. When the European Union and the United States announced their trade agreement on July 27, it was hailed by Trump as one of the biggest and greatest deals in history. The July 27 announcement between European Commission President Ursula von der Leyen and US President Donald J. Trump “restores stability and predictability for citizens and businesses on both sides of the Atlantic,” the EU said in the statement. But, just days later, neither side could agree on the actual terms of the agreement. To ameliorate the situation, the EU has now agreed to postpone for six months the 93 billion euros of planned retaliatory tariffs on US imports. Talks continue on European steel and aluminium exports to the US, focusing on quotas under which exports can be made without excessive tariffs. As a tactic, Trump treats friends and foes with equal disdain. And he continually moves the goal posts. You never really have a deal with Trump. You only “presently” have a deal. His cavalier attitude is unwise: and the ramifications are on their way. In July, Australian Steel News (ASN) spoke with a prominent international logistics firm with an office in Sydney. ASN was told that the effects of tariffs were first noticed in February with the 40% reduction of cargo from China to the US.
To avoid tariffs, steelmakers will inevitably seek markets other than the United States. This is likely to accentuate a problem which has been apparent for at least the past 12 months: the proliferation of cheap Chinese steel arriving into Australia. According to the China Iron and Steel Association (CISA), in the period January to June 2025, Chinese steel enterprises increased their steel exports by 9.2% compared to the same period in 2024. Thus, 58.1 million metric tonnes (Mmt) were exported. In the second quarter of 2025, China set a record for steel exports: 30.7 Mmt. This represents an 11% jump year- on-year and exceeds the peak figures of 10 years ago. If the current monthly export volumes continue until the end of the year, total finished steel exports from China in 2025 may reach 116 Mmt. Despite active protective measures by countries such as India, Vietnam and the EU, Chinese exporters have found ways to adapt, in particular by supplying products that are not subject to tariffs and by reorienting themselves toward markets in the Middle East and Southeast Asia. But this doesn´t mean Australia is off the hook.
Finally, in a sign of the times, Rio Tinto has reported its smallest first-half underlying profit since 2020 and lowest interim dividend in seven years. Amid falling iron ore prices and rising costs in Australia, the world’s largest iron ore producer posted underlying earnings of US $4.81 billion for the six months to June 30. This was down 16% from a year earlier. Prices the miner received for its iron ore fell by 15%, though that was partly offset by stronger prices for copper, bauxite, alumina, aluminium and gold.