Recently announced U.S. tariffs on steel and aluminum imports following Donald Trump's reelection as president will increase volatility in commodity markets and regional price disparities, Fitch Ratings said Wednesday.
"This may be exacerbated by the likely macro-economic consequences and demand implications for broader commodity markets from the recently proposed blanket U.S. tariffs on imports from China, Mexico and Canada, should they be implemented and remain in place," the rating agency said.
Effective from March 12, the U.S. intends to eliminate the system of exemptions and quotas on steel and aluminum imports, reinstating a full 25% tariff on steel and increasing tariffs on aluminum imports to 25% from 10%, the agency noted.
The White House also announced a 25% tariff on most imports from Mexico and Canada, 10% on Canadian energy resources, and a 10% tariff on China, which it further added.
Fitch expects the aluminum market to be the most affected, as the U.S. relies heavily on primary aluminum imports for domestic consumption.
In 2024, the U.S. produced 0.7 million tons of primary aluminum but consumed 4.7 million tons, with about 70% of imports coming from Canada, Fitch said.
The tariffs will likely increase aluminum prices in the U.S., boosting the U.S. Midwest premium, it underlined.
Canada may boost aluminum exports to Europe to offset U.S. policies, but the agency did not have a significant impact on global supply and demand.
"If the tariffs are maintained for a prolonged period, this could put pressure on the operating profits of aluminum end-users, such as automakers and beverage can producers, due to higher premiums," it also said.
The agency noted the U.S. is a net importer of steel, with imports accounting for about 18% of its demand. "While new domestic capacity is being built and ramped up, the U.S. will continue to rely on imports to meet demand, with Canada, Mexico and South Korea being the largest suppliers," it added.
Moreover, the impact of the changes to the tariff system will depend on any potential remaining exemptions and the tariffs’ duration, Fitch said. "We expect these policies to increase U.S. domestic steel prices, benefiting local producers."
It also cited the impacts of additional tariffs on Chinese steel products but said they were minimal since the U.S. accounts for under 1% of Chinese steel product exports.
"However, downstream sectors, such as electronics and new energy, may face demand shocks due to increasing competition from other regions, putting pressure on Chinese steel consumption. This may redirect Chinese steel exports to other countries and regions such as India and Europe, potentially squeezing domestic steelmakers’ margins."
"More aggressive U.S. trade policies than our baseline macro-economic working assumptions may weigh on global and Chinese economic growth, affecting longer-term demand for a broader set of commodities, including oil, base metals and chemicals," the agency said.
