Tariffs can encourage companies to invest in domestic production and create jobs. At the same time, they can also spark trade wars, leading to job losses in affected industries. Their economic impact is certainly complicated. At present, the U.S. is in a major tariff conflict with Canada, Mexico, and China after President Trump raised tariffs significantly.
He imposed a 25% duty on imports from Mexico and Canada and doubled tariffs on Chinese goods to 20%. This led to new trade disputes with important partners. Industry experts say these tariffs could affect $2.2 trillion in annual trade, impacting many industries.
But Trump firmly believes these tariffs aim to reduce the trade deficit. By making imported goods costlier, they are pushing Americans to buy local products.
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As per nbcnews, in 2024, Mexico, China, and Canada account for 42% of U.S. imports, making them key players in any trade conflict.
How Canada, China, and Mexico Fired Back
Canada reacted quickly. Prime Minister Justin Trudeau announced 25% tariffs on $20.7 billion worth of U.S. goods. He plans to expand these tariffs if the current ones remain. This mainly affects energy and minerals.
Similarly, China responded with 15% tariffs on some U.S. farm products like cotton, wheat, corn, and chicken. They added a 10% tariff on other goods, including dairy, fruits, vegetables, pork, beef, and soybeans. These tariffs will start on March 10. As per credible news sources, China’s commerce ministry also limited exports to 15 U.S. companies and added 10 U.S. firms to its “unreliable entity list.”
These trade barriers follow a pattern from earlier administrations. Last year, the White House decided to raise tariffs on Chinese semiconductors to 50%, while duties on Chinese electric vehicles quadrupled to over 100%. A new set of 25% tariffs on aluminum and steel will take effect soon, escalating tensions further.
Mexico’s President Claudia Sheinbaum stated the country has backup plans to handle U.S. tariffs.
U.S. Dependence on Imported Critical Minerals
A report from the Center for Strategic and International Studies highlights the U.S.’s reliance on imports for critical minerals. The U.S. relies entirely on imports for 12 of the 50 identified critical minerals and for over 50% of another 29.
Consequently, tariffs on Canada, Mexico, and China could raise costs for the U.S. These nations supplied 41% of U.S. metal and mineral imports in 2023. China leads the global production of 29 critical minerals and controls processing for rare earths, graphite, lithium, cobalt, and copper and is a major supplier for the U.S.
Doug Ford Warns of Nickel Cutoff Over U.S. Tariffs
Ontario Premier Doug Ford ripped off Trump’s exorbitant tariff rates on Canada. He threatened to halt nickel and electricity exports to the U.S. in response to the 25% tariffs on Canadian goods set to take effect tomorrow.
In an interview with NBC News NOW on Monday, Ford called the tariffs an “absolute disaster” for both nations, warning they would create “massive problems” for residents on both sides of the border.
Ford said,
“We will respond strongly and we don’t want to. “On the critical minerals I will stop shipments going into the U.S. for nickel. I will shut down manufacturing because 50 per cent of the nickel you use is coming from Ontario.”
He further opined,
”You need our uranium, you need our potash, you need our high-grade nickel. I will stockpile our high-grade nickel, that 50 percent of your military and manufacture needs. Your aluminum, your steel, your lumber. It will be an absolute disaster and this is all due to one person. That is President Trump.”
U.S. Aluminum Imports and Tariffs: Impact on Costs and Supply Chains
Domestic production of aluminum is just one-third of its needs. According to Statista, the United States imported about 4.8 million metric tons of aluminum for consumption in 2024.
Mexico and Canada supply around 90% of U.S. aluminum scrap imports. The U.S. heavily relies on aluminum and steel imports, with Canada providing 58% of aluminum and 23% of steel imports.
Meanwhile, the apparent consumption of aluminum totaled about 4.3 million metric tons, according to Statista. Canada is a top aluminum supplier to the U.S., sending most of its primary aluminum for use in American manufacturing.
Imports of aluminum for consumption in the United States from 2010 to 2024 (in 1,000 metric tons)
Disrupting these supply chains will raise costs for industries such as automotive manufacturing. The automotive parts often cross borders several times before the final assembly.
Tariff History Repeats Itself
The U.S. aluminum sector has faced trade measures before. In 2018, then-President Donald Trump imposed a 10% tariff on imported aluminum and 25% on steel to boost domestic production. These tariffs later extended to the EU, Canada, and Mexico.
In August 2024, under President Joe Biden, aluminum tariffs rose to 25%, increasing the U.S. Midwest premium by over 30%. The fresh tariff hikes by Trump have further created a whole new market uncertainty.
Increased Aluminum Prices
The U.S. Midwest premium, a key indicator of aluminum tariff risk, has risen since Trump’s election win. S&P Global revealed the current price (as of February 25, 2024) for the US Aluminum P1020 Midwest Transaction Premium is 41.75 cents per pound.
If the government adds new tariffs, aluminum prices in the U.S. are likely to go up. This will increase costs for both manufacturers and consumers.
Midwest Transaction Premium (MWP) Price History
The U.S. and Canada both want to secure critical mineral supply chains, even with trade tensions. This is because collaborating in mineral exploration, processing, and production boosts long-term stability and economic security.
However, building new domestic processing facilities and securing alternative mineral sources will take years. Thus, short-term reliance on Canadian and Mexican metals is unavoidable.
Winners and Losers: The Effects of New Tariffs on U.S. Industries
The latest tariffs will have mixed effects across industries. Some domestic producers will benefit from less foreign competition, while others will face rising production costs. Goldman Sachs has recently rolled out an evaluation report that highlights the potential winners and losers of Trump tariffs.
- Winners: Industries producing aluminum, steel, and oil and gas extraction will likely benefit the most.
Higher tariffs on imports in these sectors will protect domestic producers. As these industries compete with imports, new tariffs will make foreign goods pricier, boosting demand for U.S.-made products.
- Losers: The biggest losers will be secondary steel and aluminum producers and petroleum product manufacturers.
These sectors rely heavily on imported raw materials. Higher tariffs on steel, aluminum, and oil will significantly raise their production costs. Midstream manufacturers of products like auto parts, beverage cans, and window frames will also feel the pressure.
Can the U.S. Really Be Self-Reliant with Trump’s Tariffs?
It’s palpable everywhere how trade tensions are shaking up industries and slowing investments. Tariffs on key imports like steel, semiconductors, oil, gas, and medicine could hurt U.S. businesses more than those on Chinese goods. Moreover, the last trade war (2018-2019) showed how foreign retaliation can hit U.S. exports hard.
Many American companies rely on these imports to stay competitive. If tariffs keep changing, businesses may hold back on investing due to rising costs and supply issues. More significantly, the U.S. National security could also be at risk—China has already cut off supplies of key minerals like gallium and germanium, which are essential for defense.
However, a possible solution lies in stronger U.S.-Canada ties with favourable tariffs. A stable North American supply chain for critical minerals can reduce reliance on foreign sources and protect both the economy and national security.
