On June 4, 2025, President Donald Trump officially doubled tariffs on Canadian steel and aluminum imports from 25 to 50 percent, citing national security and the need to protect domestic industries.
While this move has been praised by some US metal producers, it has sent ripples of concern through the broader manufacturing sector.
For American manufacturers that rely on these critical materials, the implications are complex—offering both potential gains and significant challenges.
Short-term Impacts: A Cost Squeeze
- Rising Input Costs:
The most immediate effect is a sharp increase in raw material costs. Canada is the largest foreign supplier of both steel and aluminum to the US, accounting for over 40 percent of aluminum and 25 percent of steel imports, according to CBS News.
With tariffs now at 50 percent, manufacturers in sectors like automotive, construction, aerospace, and appliances are facing higher prices for essential inputs.
This cost pressure is intensified by the fact that the US does not currently have enough domestic steel and aluminum production capacity to meet total national demand. While the US has significant production capabilities, decades of offshoring and global supply chain integration have left domestic mills operating below the levels needed to fully replace Canadian imports.
As a result, manufacturers are forced to either pay the higher tariff-inclusive prices or scramble to find alternative suppliers, often at a premium.
For example, automakers—who use steel for frames and aluminum for engine components—are expected to see production costs rise significantly.
CBS News pointed out that industry analysts said that steel makes up about 60 percent of a vehicle’s weight and that aluminum is increasingly used to meet fuel efficiency standards. These cost increases are likely to be passed on to consumers, raising prices on everything from cars to washing machines.
- Supply Chain Disruptions:
Manufacturers that rely on just-in-time supply chains may struggle to adapt quickly.
Many have long-standing contracts with Canadian suppliers, and shifting to domestic sources or other countries could take months.
In the interim, production slowdowns or even temporary shutdowns are possible, especially for smaller firms with tighter margins.
Long-term Effects: Winners, Losers, and Strategic Shifts
- Boost for Domestic Metal Producers:
US steel and aluminum producers are the clear short-term winners. Share prices for major firms like U.S. Steel and Alcoa surged following the tariff announcement, according to CBS News.
With reduced competition from Canadian imports, domestic mills may see increased demand, higher prices, and improved capacity utilization—potentially reversing the recent decline in output seen between 2022 and 2023, per www.whitehouse.gov/fact-sheets/2025/06/fact-sheet-president-donald-j-trump-increases-section-232-tariffs-on-steel-and-aluminum/.
- Competitive Pressure on US Manufacturers:
However, for manufacturers, the long-term picture is more mixed.
Higher input costs could erode global competitiveness, especially in export-heavy industries.
If foreign competitors can access cheaper materials, US firms may lose market share abroad. This could lead to job losses in downstream industries, even as upstream metal producers expand.
- Innovation and Substitution:
Some manufacturers may respond by investing in material efficiency, automation, or alternative materials.
For instance, composites and recycled metals could see increased use. While this could spur innovation, it also requires capital investment and time—resources not all firms can afford.
- Trade Retaliation Risks:
There’s also the risk of retaliatory tariffs from Canada or other trade partners.
In 2018, during President Trump’s first kick at the aluminum can, a similar move led to countermeasures that hurt US agricultural and consumer goods exports. The 20128 tariffs on aluminum and steel imports were also cited by the Trump administration as a response to national security concerns.
To retaliate, several major US trading partners—including China, the European Union, Canada, and Mexico—implemented their own tariffs targeting US exports, particularly in agriculture, such as soybeans, pork, dairy, and fruits, and consumer goods.
China raised tariffs on US soybeans by 25 percent, which drastically reduced US exports to one of its largest markets. According to the USDA, retaliatory tariffs caused over $27 billion in lost US agricultural exports from mid-2018 to the end of 2019, when farmers faced plummeting prices and unsold stock, leading to increased reliance on government subsidies to offset losses.
Tariffs on US consumer goods like whiskey, motorcycles, and washing machines led to higher prices for consumers and reduced competitiveness abroad.
The truck and broader automotive industry were indirectly affected, which is what we expect this time.
Higher steel and aluminum prices from the tariffs increased production costs for US manufacturers. As well, supply chain disruptions and retaliatory tariffs on vehicle parts and finished vehicles (especially from Canada and Mexico) added further strain.
Some manufacturers delayed investments or passed costs to consumers, affecting sales and employment.
A renewed trade war in 2025 could further destabilize supply chains and dampen economic growth.
Conclusion: A Double-Edged Sword
President Trump’s tariff hike is a bold move aimed at revitalizing domestic metal production and reducing reliance on foreign imports.
While it may achieve those goals in part, the broader consequences for US manufacturers are far from uniformly positive.
In the short term, higher costs and supply chain disruptions loom large. And without sufficient domestic capacity to fill the gap, manufacturers may face prolonged cost pressures.
Over the long term, the policy could reshape industrial strategies in a positive manner, but not without short-term pain.
For American manufacturers, the challenge now is to adapt quickly—balancing cost pressures with innovation and navigating a shifting global trade landscape.