The latest move by the Trump administration to impose a 25% tariff on imported steel and aluminum, which came into effect on Wednesday, is expected to drive up the cost of imported goods worth around $150 billion, dealing a significant blow to the profits of American automakers and other companies. According to a report by Nikkei Asia, the US imports about one-fifth of its total steel consumption, with Canada being the largest supplier, accounting for over 20% of the total weight, followed by Brazil at 16% and the European Union at 7%. Japan ranks seventh as a steel supplier to the US, accounting for 4% of the total. Notably, Canada is also the largest exporter of aluminum to the US.
As the tariffs directly affect importers, the increased cost is likely to be borne by manufacturers, particularly in the US automotive industry. A US-based research firm, Wolfe Research, predicts that the 25% tariff will lead to a 16% surge in steel prices from the average level in 2024, while aluminum prices, which were already on the rise, are expected to nearly double. Anindya Das, an analyst at Nomura Securities, has assessed the potential impact on the operating profits of automakers in the fiscal year 2025, assuming a 10% increase in steel and aluminum prices from the 2024 average. The results show that Ford Motor and General Motors would be the hardest hit, with a potential decline of 3-4% in their profits if they fail to pass on the increased costs to consumers. In contrast, Toyota Motor would experience a relatively minor impact of 0.5%, while Subaru, which has its main production base in North America, would see a 2% decline.
Data from the European Union’s Global Trade Alert indicates that the Trump administration’s tariffs cover 289 product categories, with a total import value of $151 billion in the past year, accounting for approximately 4.5% of the US’s total imports. China is the most affected country, with $35 billion worth of exports to the US subject to tariffs, followed by Mexico at $30.6 billion, the European Union at $20.3 billion, and Canada at $17.1 billion. Japan ranks seventh, with $7 billion worth of exports affected.
In response to the tariffs, companies in other industries have started exploring alternative materials. Last month, Coca-Cola announced plans to replace some of its aluminum packaging with plastic if the tariffs come into effect. This move highlights the potential far-reaching consequences of the Trump administration’s trade policies, which could lead to a significant shift in the way companies operate and the materials they use. As the situation continues to unfold, it remains to be seen how the tariffs will impact the global economy and trade landscape.
