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Managing steel and aluminium tariff uncertainties

On March 12, 2025, the US government announced new 25% tariffs on steel and aluminium imports, deepening ongoing concerns about the potential implications for global trade and domestic industries.

On 12 March 2025, the US government announced new 25% tariffs on steel and aluminium imports, deepening ongoing concerns about the potential implications for global trade and domestic industries. While the US government has noted that these tariffs aim to protect US manufacturers, these tariffs may broadly impact the economy, sectors, and geographies given how vital these metals are in industrial production and daily life. Even greater repercussions for the global and US economy are expected if reciprocal tariffs are imposed by the US government on 2 April in light of any actions taken against US goods by trading partners.

An analysis of our largest clients’ supply chains using our Sentrisk supply chain visibility tool underscores this, revealing how reliant US companies are on steel and aluminium imports and the potential for far-reaching impacts from tariffs on global supply chains.

To better manage these tariff risks, organisations need to understand steel and aluminium trade flows, the potential challenges that different industries face, and the potential mitigation actions to be taken.

Overview of steel and aluminium trade flows

In 2024, the US imported approximately 29 million metric tonnes of steel (25% of all consumption) and 4.9 million metric tonnes of aluminium (50% of all consumption). The US’s primary sources of steel imports include Canada and Mexico, while aluminium imports are dominated by Canada. The availability of lower-cost hydroelectric power has enabled Canada to carve out a highly competitive position in energy-intensive aluminium production.

Taking a more global view, using our Sentrisk tool, we see slightly different patterns in the concentration of steel and aluminium suppliers for several of our larger clients. The majority of these clients’ suppliers for both materials are located in the US, followed by China, Germany, Vietnam, and Mexico. Depending on what and where they are manufacturing, many of their direct inputs or component parts could now be subject to the US’s 25% tariff on steel and aluminium or they may be facing actual or proposed retaliatory tariffs from trading partners that cover a wider array of products.

Regardless of location, these tariffs and counter-tariffs are expected to exacerbate supply chain challenges and may increase costs for businesses. While steel prices stabilised recently even as aluminium prices continued their climb, prices for both are expected to rise further due to tariff tensions. And while increasing US production of steel and aluminium could alleviate these pressures, significant investment and infrastructure build-out may be required, which could take several years and up to a decade.

Select industry impacts

A wide range of industries are affected by the tariffs on steel and aluminium. Some of those more significantly impacted include:

Automotive: Steel is a critical component in vehicle manufacturing, while aluminium is commonly used to reduce weight and improve fuel efficiency. The tariffs are expected to raise production costs significantly, with estimates suggesting that the average cost of producing a vehicle could increase by US$1,500 or more in the US alone. This may lead manufacturers to pass higher costs onto consumers, potentially reducing demand in an already competitive market. Additionally, with automotive parts sourced globally, tariffs could lead to delays, sourcing difficulties, and increased costs, all of which could affect production schedules and delivery timelines for vehicles.
Construction: Steel is essential for structural components, rebar, and other construction materials. Higher costs due to tariffs could result in higher home prices, potentially slowing down new construction projects and exacerbating housing shortages, particularly in the aftermath of major natural disasters in the US and worldwide. Additionally, delays in obtaining steel and aluminium could halt major projects, potentially leading to increased labour costs and project overruns, further straining budgets.
Manufacturing: Many manufacturers, including those producing appliances, bicycles, and machinery, rely heavily on steel and aluminium. Any rise in material costs can squeeze profit margins. In addition, manufacturers may face increased competition from foreign companies that can source materials at lower prices. This could shift market dynamics, prompting some companies to consider relocating production to countries with more favourable trade conditions.
Aviation and aerospace: Aluminium is a vital material in aircraft and aerospace manufacturing and components are sourced globally. Tariffs are expected to increase production costs and competitive pressures for global manufacturers, which may affect delivery schedules and customer relationships.
Energy and power: Steel and aluminium are essential for constructing wind turbines, solar panels, and other energy infrastructure. The tariffs could increase project costs, potentially slowing the transition to renewable energy sources and hindering growth in this critical sector.

In addition, businesses that rely on imported materials for packaging — for example, pharmaceuticals (blister packs) and food and beverage (cans) — may need to pass on marginal costs to consumers or seek substitution materials, such as plastic bottles.

Five strategies designed to mitigate steel and aluminium tariff risks

To more effectively navigate the challenges posed by increasing steel and aluminium tariffs, your business should actively monitor global trade policy and tariff developments and be prepared to adjust your sourcing activities. Five risk mitigation strategies for you to consider include:

Diversify supply chains: Reducing reliance on specific countries or suppliers that are subject to higher tariffs can help minimise risks associated with geopolitical tensions and supply chain disruptions.
Negotiate long-term contracts: Establishing long-term contracts with suppliers can help lock in prices and provide more stability amid fluctuating tariffs. This approach can also strengthen relationships with suppliers, potentially leading to better terms and reliability.
Implement cost-reduction strategies: Conducting thorough reviews of your operations can help identify areas where costs can be reduced. Follow-on actions could include optimising production processes, minimising waste, or investing in technology that enhances visibility and efficiency.
Explore alternative materials: Substituting steel and aluminium with alternative materials less affected by tariffs can help with cost management. This approach requires careful evaluation of material properties, brand impact, and financial impact, as quality and sustainability may pose both short- and long-term risks.
Invest in domestic production: Exploring opportunities to invest, co-invest, or otherwise support domestic production capabilities can help reduce your tariff exposures. You may potentially benefit from government incentives and grants aimed at boosting domestic industries, though there may be short- and long-term trade-offs to be managed.

You also should consider the role your current or additional insurance coverage could play in your steel and aluminium tariff risk management strategies. For example, trade credit insurance could protect you from customers facing financial pressures and potential payment defaults because of the tariffs, political risk insurance could help you safeguard investments and assets in tariff-affected countries, and cyber insurance could help you recover from any incidents stemming from newly engaged and unfamiliar suppliers whose cybersecurity controls and processes may not match your own standards. Consult your insurance broker with regards to these and other potentially applicable coverages that can support your short-term and long-term plans.

Agility and innovation required to successfully navigate tariff uncertainties

Steel and aluminium tariffs and counter-tariffs are poised to have potentially significant impacts on businesses globally in the near and long term. Ultimately, the ongoing evolution of global trade policies will continue to shape the economic environment and supply chain landscape for companies across a range of commodities, metals, and other inputs, necessitating agility and innovation in response.

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This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modelling, analytics, or projections are subject to inherent uncertainty, and any analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change.