U.S. steel, aluminum tariffs mean higher costs for auto makers and suppliers

The U.S. imposed tariffs on imports of steel and aluminum, a move likely to increase costs for auto makers and suppliers that import the metals into the country.

The 25 percent tariffs, which started March 12, apply to steel and aluminum regardless of country of origin.

They also apply to certain products that contain steel and aluminum sourced from outside the U.S. Those include aluminum bumpers and hinges, as well as steel lug nuts and certain other parts imported by the auto industry.

The tariffs will put pressure on the auto industry as prices rise, said Simon Geale, executive vice president at procurement and supply chain consultancy Proxima.

“This will directly affect vehicle production, as steel and aluminum are critical materials, driving up the costs of key components and manufacturing processes,” Geale said in an emailed statement.

The tariffs expand on those President Donald Trump imposed in 2018 during his first term, when 25 percent duties on steel imports and 10 percent import taxes on aluminum went into effect.

Over time, the Trump and Biden administrations granted full exemptions or reached deals on import quotas with countries including Canada, Mexico, Argentina, Australia, Brazil, South Korea, the U.K. and European Union nations, limiting the scope of the tariffs.

But those exemptions have been lifted. The rate for aluminum tariffs has more than doubled to 25 percent as the Trump administration looks to bolster domestic producers of the metals and encourage companies to source products locally.

The auto industry is one of the world’s largest buyers of steel and aluminum and stands to be among the sectors most impacted by the tariffs. They are likely to “throw off everybody’s calculations on profitability,” especially for aluminum-intensive vehicles such as the Ford F-150 pickup, said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.

“The supply chain requires a steady price and a steady supply of product to keep assembly lines going,” Fiorani said.

The Detroit 3 purchase the “vast majority” of their steel and aluminum from the U.S. and North America, said Matt Blunt, president of the American Automotive Policy Council, which represents General Motors, Ford Motor Co. and Stellantis.

“We are still reviewing and awaiting all of the details of the tariffs, but revoking the exemption for Canada and Mexico and extending tariffs to auto parts with steel and aluminum will add significant costs for auto makers, suppliers and consumers,” Blunt said in a statement.

Many companies that rely on imports of steel and aluminum are likely to seek alternative sources in the U.S. That’s what happened in the years after Trump first put steel and aluminum tariffs in place.

A 2023 report by the U.S. International Trade Commission found that the 2018 tariffs reduced imports of affected steel by 24 percent while increasing the price of steel products in the U.S. by 2.4 percent. Aluminum imports fell 31 percent, while prices rose 1.6 percent.

Prices were already on the rise this year as companies prepared for new tariffs. According to a March 11 report by Bloomberg, prices to get spot supplies of aluminum in the U.S. were about 23 percent higher than in Europe, and steel was 40 percent more expensive to obtain than in Europe.

It is easier said than done to find new metal sources, and it will take time for domestic steel and aluminum producers to increase production, Fiorani said.

“Locating enough ore and hiring enough workers and pulling enough plants out of mothballs to get the capacity up just doesn’t happen overnight,” he said. “By slapping a tariff on steel, it’s not going to ignite the industry immediately. It’s just going to raise prices.”

It was “not entirely clear” if there will be enough supply available for automotive companies to pivot to U.S. sources, said Homayune Ghaussi, chair of law firm Warner Norcross + Judd’s supply chain industry group. Companies also often have contracts with overseas producers that obligate them to buy from them, and they could be sued if they don’t, he said.

Suppliers also typically need to receive approval from companies further up on the supply chain if they wish to change sourcing, he said.

“Even if there is supply available from another source in the U.S. and you are contractually allowed to change sources, you still need approval up the chain,” Ghaussi said.

Domestic steel producers welcomed the tariffs. In a March 10 letter to Trump, five organizations representing the U.S. steel industry said the tariffs will help to boost the viability of American steel makers and increase national security.

“We welcome and applaud your actions to restore the integrity of the Section 232 tariffs on steel and your commitment to restoring a level playing field for American steel producers and their workers,” the groups wrote.

In a statement praising Trump’s efforts to boost domestic aluminum production, Aluminum Association CEO Charles Johnson said there is “not enough smelting capacity in the United States to supply the growing aluminum industry with the input materials it needs.” The Aluminum Association represents aluminum companies in the U.S.

The U.S. imported about $31.5 billion of steel and $18.5 billion of aluminum in 2024, according to a report by the Congressional Research Service. Canada was the largest source of both materials brought into the country, accounting for 23 percent of steel imports and 51 percent of aluminum imports.

Most U.S. steel consumers source the metal from domestic producers. Imports accounted for 23 percent of all finished steel in the U.S. in 2024, according to an estimate by the American Iron and Steel Institute.

The steel and aluminum duties went into effect amid a broader tariff push by the Trump administration. Goods from China are now subject to a 20 percent fee, and some products from Canada and Mexico are being taxed at 25 percent after those tariffs went into effect March 4.

On March 6, the Trump administration paused tariffs on Canadian and Mexican goods that comply with the United States-Mexico-Canada Agreement’s rules for duty-free trade. That pause, which came in response to pressure from auto industry executives and others, is in effect until April 2. Most vehicles and parts imported from Canada and Mexico meet those rules.

The Trump administration is also expected to begin rolling out reciprocal tariffs on U.S. trading partners April 2, and it has floated a global duty on automotive imports as soon as that day.

The steel and aluminum tariffs came a day after Trump threatened to raise Canadian steel and aluminum duties to 50 percent because of Ontario placing an export tax on electricity sent to the U.S. The Ontario electricity tax was a response to the 25 percent tariff on Canadian goods.

Ontario Premier Doug Ford lifted the tax March 11 after a conversation with U.S. Commerce Secretary Howard Lutnick. Ford plans to meet with Lutnick in Washington on March 13.

“We have both agreed, let cooler heads prevail,” Ford told reporters.

Soon afterward, the White House backed off plans to double tariffs on Canadian steel and aluminum.

The European Union said it will place tariffs on about $28.3 billion worth of U.S. goods in April.

On April 1, retaliatory tariffs on goods such as boats, bourbon and motorcycles that it put in place in 2018 and 2020 will be reinstated. The EU plans to identify other products to place additional duties on by mid-April.

Canada announced tariffs on $20.7 billion of U.S. goods beginning March 13, covering products including computers, sports equipment and cast-iron products, in addition to American steel and aluminum.

Canadian Foreign Minister Melanie Joly told reporters she will raise the topic of tariffs with her European counterparts to coordinate a response and put pressure on the U.S.