The U.S. administration's doubled tariffs on steel and aluminum could lead to increased costs for automakers and their suppliers.
As of yesterday, June 4th, the Trump administration has doubled tariffs on steel and aluminum imports to 50 percent. The only exception is the United Kingdom, which remains at 25 percent.
This decision is officially aimed at stimulating domestic production, but its effects will be felt throughout the entire automotive supply chain.
The automotive industry, highly dependent on imported metals for vehicle and parts manufacturing, risks seeing its production costs soar, at the expense of profit margins and potentially the final price paid by the consumer.
What do the tariffs target?
The new duties apply to all imported metals, except those from the UK. They also cover a wide range of derived products, such as auto parts made from foreign aluminum or steel. In 2024, nearly $25.7 billion USD worth of vehicle parts were targeted by metal surcharges.
Are there exemptions for the auto industry?
Yes, but they are limited. Under pressure from manufacturers and suppliers, Washington has introduced partial exemptions. If a vehicle or part is already subject to the 25-percent automotive tariff, it will not be double-taxed with the metal duties.
However, any part not included in the specific auto tariff list remains subject to steel and aluminum duties, which could affect many suppliers. Good news for Canada and Mexico: the tariffs do not apply to their parts, according to a presidential proclamation dated June 3rd.
Effects on the auto industry and the U.S. economy
A 2023 report by the U.S. International Trade Commission found that the 2018 tariffs had led to a 24-percent decrease in steel imports, but also a 2.4-percent price increase. For aluminum, imports had dropped by 31 percent, with prices rising by 1.6 percent.
Back then, automotive manufacturers reported a decrease in available supply, increased costs and longer delivery times. Clearly, the gains for domestic steel mills came at the expense of assemblers.
Where do the metals come from?
In 2024, the United States imported $31.5 billion USD in steel and $18.5 billion USD in aluminum. Canada is the leading supplier, accounting for 23 percent of steel imports and about half of aluminum imports. Mexico, the European Union, Brazil, Japan and South Korea follow.
Despite strong domestic steel production, the U.S. still depends on imports for 50 percent of its aluminum, which exacerbates the industry's vulnerability to tariff increases.
By doubling tariffs, the Trump administration is betting on domestic industrial revitalization. But for the North American automotive sector, the increased duties could translate into higher costs, prolonged delays and increased logistical complexity. Suppliers, particularly in Canada, will need to stay vigilant to avoid getting caught in this new wave of protectionism.