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(Bloomberg) -- The global aluminum market is entering a fresh period of upheaval as traders rush to assess the potential impact of renewed US protectionism under President Donald Trump.
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The US leader ordered tariffs of 25% on all imports of aluminum and steel on Monday, effectively toughening up a trade regime he launched during his first presidency. The measures threaten to increase costs for US buyers, and at least some rerouting of international trade flows.
“We expect any tariff would lead to higher prices for US manufacturers” via a rise in regional premiums, ANZ Group Holdings Ltd. analysts, including Daniel Hynes, wrote in a note. More Canadian supply will likely be exported to Europe, with the US increasing its purchases from the Middle East, they said.
The tariffs mark the start of a new phase for a global aluminum market that has been rocked in recent years by international sanctions and energy-market turmoil in the wake of Russia’s invasion of Ukraine. The metal rose 7% last year on the London Metal Exchange.
Trump has effectively expanded the tariffs introduced in 2018, which former President Joe Biden largely kept in place. Exemptions for major suppliers — including Canada, Mexico, Brazil, the European Union — are now removed, and the rate for aluminum imports has been raised from 10% to 25%.
There is speculation that some nations could again be excluded as Trump uses these new measures as leverage in his wider effort to reset America’s trade relations. He has already imposed 10% tariffs on all imports from China, while 25% levies on Mexican and Canadian goods have been announced but put on hold for now.
“Assuming no significant exemptions, we expect the aluminum and steel tariffs to be largely passed through to US prices,” Goldman Sachs Group Inc. analysts, including Eoin Dinsmore, wrote in an emailed note. “This policy impacts the cost of importing aluminum into the US, but has no direct impact on the LME price in London.”
Even as Trump on Monday warned that his metals tariffs could go even higher, the price reaction on the LME was relatively muted. Aluminum prices on the LME were down 0.6% at $2,642.50 a ton as of 1:01 p.m. local time. All metals were lower on the exchange, with copper down 1.1% and nickel falling 1%.