Trump wants to double steel and aluminum tariffs to 50%, US futures prices soar

According to media reports, US aluminum and steel futures prices soared after US President Donald Trump said he would double tariffs on aluminum and steel to 50%.

On Monday, the price of aluminum contracts on the New York Mercantile Exchange (Comex) rose 54% to the highest level since 2013, as aluminum import tariffs will be increased to 50% starting Wednesday this week.

In the Midwest, aluminum prices for various uses from beer cans to engine blocks and window frames are 58 cents per pound higher than the London benchmark contract, or about $1,280 per ton. This means that US buyers may eventually have to pay about 50% more than international competitors to obtain the metal.

Trump's tariffs have caused US aluminum premiums to soar

Trump hopes that raising tariffs will protect the profits of domestic producers in the United States and stimulate investment in new production capacity. Shares of U.S. steel and aluminum producers surged in after-hours trading after Trump’s announcement on Friday. But construction companies warned that Trump’s move to increase tariffs on steel and aluminum from 10% to 25% would drive up costs for key building materials.

Comex steel futures rose more than 8% on Monday before giving up some of those gains. While liquidity in both contracts is relatively low, the moves suggest the commercial burden of tariffs will hit the U.S. aluminum market hardest. The U.S. imports more than 80% of its aluminum, while less than 20% of its steel comes from overseas, according to Morgan Stanley.

“We expect prices to rise — and domestic capacity is lacking,” Citigroup analysts said. For aluminum in particular, the tariffs “have so far been primarily a tax on consumers.”

In contrast, benchmark aluminum on the London Metal Exchange (LME) rose 0.9% to $2,466 a tonne. Copper rose 1.2% in London and nearly 4% in New York. Analysts said the tariffs make it more likely that Trump will go ahead with his plan to impose tariffs on copper.

“The market also appears to be pricing in a heightened likelihood of copper tariffs, with New York futures outperforming London futures," said Morgan Stanley analysts led by Amy Gower. The analysts also said U.S. buyers have been front-loading imports before potential tariffs take effect. “For now, the COMEX premium is likely to continue to attract raw material flows to the U.S., reducing inventories outside the U.S. and keeping the ex-U.S. market tight.”