Will Trump’s aluminium and steel tariffs hit Gulf exports?

US President plans to impose 25 per cent duties on all imports of the metals

At present, the US imports about 70 per cent of its aluminium supply. Bloomberg

US President Donald Trump’s threat to impose 25 per cent tariffs on all aluminium and steel imports will have a limited effect on the Gulf region’s exports of these metals, although further clarity is needed assess the global impact, analysts say.

Mr Trump, who made the announcement on Sunday, said it would apply to all countries. The tariffs will take effect on March 12, the White House said on Monday.

Currently, the US imports about 70 per cent of its aluminium supply, with about 60 per cent coming from Canada, tariff-free.

The top exporters of aluminium to the US in 2024 included Canada, with more than 3.15 million tonnes, the UAE (347,033 tonnes) and China (222,871 tonnes), according to US International Trade Administration data. South Korea and Bahrain rounded off the top five aluminium exporters to the US last year. The US also imports aluminium from Oman, Qatar and Saudi Arabia, the ITA data shows.

While the Gulf is the second largest supplier to US of primary aluminium, representing about 16.3 per cent of all imports of the metal last year, “it falls far short of the dominant supplier that is Canada”, said Ross Strachan, principal analyst, aluminium at commodities research firm CRU Group.

“If all countries are tariffed at the same rate, as appears likely, then volumes from the Gulf are not likely to be hugely affected by this development, at least immediately, as it would lead to a markedly higher US MW premium that will offset the cost of the tariff,” he told The National.

Most recent data suggests that about 25 per cent of UAE exports to US consisted of products related to steel and aluminium, said Ralf Wiegert, head of Mena economics at S&P Global Market Intelligence. Similar shares are applied for Qatar, while Saudi Arabia’s share of exports to the US in these product groups taken together is less than 10 per cent.

“Given that Saudi Arabia has the highest share of exports to the US relative to total exports [at 5 per cent], and all other GCC member countries have less than that, the share of exports affected is very likely less than 0.5 per cent for all GCC exports,” Mr Wiegert told The National.

“From a GCC point of view, the tariffs on steel and aluminium are a nuisance, but surely not a show-stopper for the domestic industry given that GCC companies in steel and aluminium enjoy a strong competitive advantage with low energy costs in the region.”

The UAE is the biggest producer of aluminium in the world after China, India, Russia and Canada, with Bahrain in sixth position, according to Cru.

From a GCC point of view, the tariffs on steel and aluminum are a nuisance, but surely not a show-stopper for the domestic industry

Ralf Wiegert,
head of Mena economics at S&P Global Market Intelligence

In terms of steel, the US procures roughly 25 per cent of its needs through imports – about 80 per cent of which is currently tariff-free under agreements with Canada, Mexico, the EU, Japan, South Korea, Brazil and others, according to Japanese bank MUFG.

Gulf countries are a minor supplier of steel to the US, with only 1 per cent of US steel imports come from the region, mainly from the UAE and Saudi Arabia, said Matthew Watkins, principal analyst steel at Cru.

“So, from the US side, the GCC is not a large target on steel,” he told The National.

Meanwhile, for the Gulf, the US represents about 6 per cent of its total extra-regional export volumes of steel, with China and the EU far larger export markets.

“Nevertheless, even though 6 per cent sounds small, that does make the US the GCC’s third-largest export market. A potential reduction in access to that market would therefore not be painless for GCC producers. But they would probably be able to find alternate markets if necessary,” Mr Watkins said.

Mr Trump, who threatened to impose heavy tariffs during his election campaign, including sweeping duties on imports from some of the closest trade partners of the US as part of his America first agenda.

After taking office for his second four-year stint, he announced a 25 per cent tariff on Mexican and Canadian goods to take effect from February 1, but delayed the implementation for a month in exchange for commitments on border security and crime enforcement from both countries. However, he went ahead with plans to impose 10 per cent duties on goods imported from China.

Canada and Mexico hit back after Trump imposes heavy tariffs

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“Another week starts with tariff threats. This time, everyone that applies tariffs to the US will be hit back with the same tariffs, and all aluminium and steel imports to the US – no matter from whom – will face a 25 per cent tariff,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a note on Monday.

Steel and aluminium also faced duties during Mr Trump’s first term, when he implemented tariffs of 25 per cent on steel and 10 per cent on aluminium in 2018, citing national security. At the time, some trading partners avoided the tariffs by agreeing to voluntary export restraints on steel or aluminium.

“Steel and aluminium are already subject to significant tariffs under Section 232 for several countries, an additional tariff will be incremental in nature for those countries,” said Ashima Tyagi, economics associate director at S&P Global Market Intelligence. “Countries that received carve-outs in the form of exemptions, special status, tariff rate quotas and/or some company specific exemptions in the previous round are likely to be impacted strongly,” she told The National.

While there is no clarity on the countries that will be subject to these tariffs in this round, it is likely that tariffs on Canada and Mexico will affect US domestic steel pricing much more strongly, she said.

Canadian imports account for nearly 33 per cent of flat steel imports, 17 per cent of pipe imports, and 25 per cent of long steel imports into the US.

Meanwhile, Mexico contributes 13 per cent of long steel imports, 8 per cent of flat steel imports, and 11 per cent of steel pipe imports, according to S&P Global Market Intelligence data.

“While the possibility of tariffs exists, it remains unclear whether a president can impose them unilaterally due to the United States-Mexico-Canada Agreement (USMCA), a treaty ratified by the Senate, which is also up for review in 2026,” Ms Tyagi added.

In the medium term, the move “could harm US demand for aluminium as it raises prices for consumers and it could also encourage restarts of domestic US production”, Mr Strachan said.

According to MUFG, a 25 per cent tariff would increase the price of Midwest premium aluminium to about $0.40 – $0.45 per pound compared to the current rate of about $30 cents per pound (excluding transportation and other factors).

Meanwhile, the similar rate of duty on steel would add about $150 per tonne to the import cost, taking steel (hot-rolled coil) import parity with the EU to about $800 to $900 per tonne against the current price of about $755 per tonne, the bank said.

Carbon steel prices are broadly being characterised as a buyer's market through 2025, according to S&P Global Market Intelligence's forecast in December. "Demand remains weak globally, leading to substantial idle capacity. Supply can easily meet consumption levels, and the ability to restart idle furnaces limits potential price increases," said Ms Tyagi.

“Any rise in prices throughout 2025 will stem from further production cuts rather than demand increases. We anticipate that prices may only sustain a rally if there is a genuine recovery in construction and manufacturing towards the end of 2025.”