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In February 2025, President Trump reinstated a 25% tariff on steel imports and raised aluminum tariffs to 25%, removing all previous exemptions. This expanded tariffs to include key downstream products and ended approved exclusions. Analysts expect price hikes in vehicles, consumer goods, and construction. However, past tariffs indicate U.S. producers may see economic gains and job growth, while international companies face higher costs and market uncertainty. For sectors like CPG, industrial, automotive, and construction, agility and monitoring will be critical to managing supply chain risks and rising costs.
Key Takeaways:
- Leverage the trade and tariff analysis during the first Trump Administration, especially as they pertain to metals imports and exceptions, as it will help differentiate the enduring tariffs from those used for negotiation
- Recognize the feasibility of U.S. investment in these sectors, but also the impact of the tariffs on end uses like cans and other consumer products, cars, or construction
- Plan to revisit assumptions on input costs, variability in demand factors, and a recurring need for reassessment of business strategy and operational planning
What were the Trade and Tariff landscape and achievements during the first Trump Administration?
The imposition of tariffs on steel and aluminum imports had multifaceted effects on U.S. companies and importing nations. While some U.S. steel producers expanded operations in response to reduced competition (e.g. Logan Steel, a family-owned company in Connecticut), we didn’t witness wide-spread investment in the Steel sector. And today, hallmark companies like U.S. Steel are fighting for existence in the face of acquisition by Japan’s Nippon Steel.
The main impacts of those tariffs were as follows:
- Domestic steel producers. These companies benefitted from the tariffs through increased prices and reduced import competition. Some made investments in adding capacity
- Alcoa. A leading U.S. aluminum producer experienced a boost in stock price following the announcement. There was general investor optimism. But Alcoa couldn’t translate that into expansion of its U.S. smelter capacity. However, even with a favorable trade policy, Alcoa couldn’t translate that into expansion of its U.S. smelter capacity. Still, the company faces tariff exposure, as it manufactures 2.2 million metric tons of aluminum per year, of which 900,000 metric tons are manufactured in Canada. Alcoa has stated it would likely reroute its Canada-made aluminum to Europe to avoid potential tariffs and import its Australian output to the U.S.
- Century Aluminum. This Chicago headquartered company had a smelter closure in June 2022. The Kentucky-based smelters idled after power costs tripled, which rendered operations unsustainable. On the other hand, they had announced a “Green Aluminum Smelter Project” with the help of DOE’s $500m award under the Infrastructure Law and IRA. As of early 2025, the project remains in the study phase, with $10 million allocated for further research, indicating that output is still not imminent
- Magnitude 7 Metals (New Madrid Smelter). Located in Missouri, the smelter shut down in early 2024, due to high electricity costs. Current efforts are underway to reopen the plant and save the 500 jobs cut. Magnitude 7 Metals produced about 20% of the aluminum made in the United States before cutting operations
- ArcelorMittal. To mitigate the impact of potential tariffs, ArcelorMittal considered adjusting its supply chain by reducing slab imports from Mexico and increasing those from Brazil, leveraging its production capabilities in both countries. As a signal to growth in the EV market, ArcelorMittal is investing $1.2 billion to build an Alabama mill slated to produce advanced steel by 2027 for domestic hybrid and electric vehicle motors
- Importing companies. The tariffs impacted the companies that don’t operate in the U.S., but feed into the profitable U.S. market. Rio Tinto expressed concerns about the tariffs’ potential disruption to international trade. Rio Tinto ships a majority of its Canadian aluminum into the U.S. Vedanta, an Indian aluminum importer declared that the tariffs reduced their competitiveness in the U.S.
- Automakers direct supply chains to domestic sources. A 25% import duty could increase the price of a typical vehicle by $1,500. Each automaker will incur costs differently, and many companies have already adjusted their supply chains towards domestic sources of aluminum and steel during the first Trump administration. Ford, for example, uses 90% of steel from domestic sources, with 10% coming from Canada and none from Mexico
While some industries, like domestic steel and aluminum, benefited from the tariffs, the broader economic effects were mixed. The tariffs provided temporary relief to certain sectors but also raised costs, reducing U.S. competitiveness in others, especially for the users of these materials.
Unintended Consequences:
- Cost pressure. Tariffs raised the cost of raw materials like steel and aluminum, leading to higher prices for manufactured goods and, ultimately, American consumers. The Federal Reserve found that U.S. manufacturers ended up facing higher costs for raw materials they imported, as well as from retaliatory tariffs from other nations
- Jobs. The US Steel and Aluminum sector employs around 113,000 individuals. The Steel sector has around 83,600 workers while Aluminum has around 30,000 individuals. The two sectors, collectively support 634,000 jobs including direct and indirect or induced employment, and contribute $176 billion to the U.S. economy. While tariffs were associated with job gains in steel and aluminum manufacturing, it was estimated that tariffs also led to a net loss of jobs associated with industries using steel and aluminum as inputs. According to the Federal Reserve Board, President Trump’s 2018 tariffs resulted in the direct loss of 75,000 manufacturing jobs. The overall impact of the tariffs on U.S. employment is nuanced
- Chinese competition. With China having overcapacity in steel and aluminum, Chinese exports may be cost-competitive even with the 25% tariff. Furthermore, Chinese steel makes up less than 2% of all U.S. imports (due to current barriers), so the tariffs have little impact on their ability to dominate in other markets. This drags down global prices and may squeeze U.S. producers (even if Chinese imports are negligible)
- Escalating trade tensions. Retaliatory tariffs from countries like China, the EU, and Canada can harm economies by increasing costs, disrupting trade flows, and creating uncertainties, all of which negatively affect businesses and consumers globally
Did Tariffs lead to increased investment in the Steel and Aluminum sector domestically?
While Tariffs on steel and aluminum were also expected to lead to increased investment in the U.S. for these two materials, the U.S. material sector has faced significant challenges leading to smelter closures and limited new investments.
- The number of operational smelters in the U.S. has decreased to just four. Recent shutdowns between 2022 and 2024 include smelters in Kentucky, Missouri and Washington State
- Higher energy costs. The energy-intensive nature of these materials, coupled with high domestic energy costs, deterred new investments. Structurally, the energy cost profile doesn’t support investment in these sectors. President Trump’s newly enacted National Energy Dominance Council, which was signed in by executive order on February 10, looks to lower domestic energy costs in support of industrial expansion
These policies will likely lead to higher costs for both businesses and consumers, further destabilizing global trade relations. However, certain domestic industries may benefit from reduced foreign competition and government incentives designed to support reshoring efforts.
In the meantime, the reinstated and expanded tariffs on steel and aluminum are expected to impact the following key sectors:
- Automotive. Higher car prices are a direct impact of tariffs. Steel and aluminum are critical components for vehicle manufacturing. Estimates suggest price increases ranging from 1% to 4% per vehicle, depending on the model and material composition
- Beverages and canned goods. Beverage and good cans are directly impacted by raw material costs. Retail prices are expected to increase for sodas and canned foods, we estimate a price increase of about 0.5 – 3.5% per can
- Construction. Steel is extensively used in building and construction. Higher steel prices lead to increased costs for commercial real estate, housing projects, and infrastructure development. Cost over-runs of 5-10% are anticipated
Tariffs lead to inflationary cost pressure on these main sectors and hence on the price consumers and companies will pay for the products. Investment in these sectors domestically will require an overarchingly revised energy policy and government subsidies to survive. It will also require a lot of consumer patience to allow the US industrial, CPG, and Real Estate sectors to stabilize.
What should boards of directors plan for in the new administration?
To better navigate President Trump’s tariff policies, industrial and materials company boards should consider the following strategies:
- Assess supply chain risks. Evaluate exposure to imports, especially from China, and explore diversifying suppliers or relocating production to tariff-exempt regions (e.g., Mexico and Canada under USMCA). Adopting a “China+1” strategy should be a top priority
- Engage in pre-competitive advocacy. Work with industry groups and trade associations to advocate for policy changes or exclusions for critical materials that may be disproportionately impacted by tariffs
- Monitor pricing strategies. Assess the ability to pass on increased costs to customers without sacrificing market share. Price elasticity will be a key factor in maintaining competitiveness
- Optimize operations and agility. Invest in lean manufacturing processes, automation, and other operational efficiencies to absorb rising material costs and reduce dependency on tariff-affected products
- Ensure supply chain traceability. Use technology to ensure compliance with evolving trade laws and to track materials through the supply chain, minimizing risks associated with forced labor or other compliance issues
- Develop geopolitical scenarios. Incorporate trade war risks and potential tariff escalations into enterprise risk management frameworks, ensuring boards are prepared for volatile international trade dynamics
- Strengthen resilience. Explore nearshoring and dual-sourcing strategies to mitigate geopolitical risks and create more resilient supply chains that can withstand disruptions
- Evaluate U.S. investments. Identify opportunities to expand U.S.-based manufacturing facilities to take advantage of government incentives for reshoring critical industries.
- Leverage government incentives. Actively engage with government agencies to secure subsidies or tax breaks aimed at reshoring manufacturing and bolstering domestic production capabilities
- Invest in workforce development. Focus on upskilling the workforce to adopt new manufacturing technologies, including those aligned with sustainability goals, ensuring long-term competitiveness
By proactively addressing these areas, boards can position their companies to not only mitigate risks but also capitalize on opportunities arising from the evolving trade policies.
Additional Telesto resources:
- North American Trade Policy – Considerations for Industrials
- Board Series: What Canada and Mexico tariffs will mean for CPG companies – questions for the boardroom
- Board Series: Trump 2.0 tariffs and preparedness for Industrial companies
- Board Series: Preparing for China’s retaliation to Trump 2.0 tariffs
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