On Monday, November 26, US President-elect Donald Trump reiterated his tariff plans on social media, including a 25 per cent duty on all imports from Mexico and Canada. According to Citibank analysts, the tariff on Mexico and Canada would affect the global commodity market, but the maximum impact would be on aluminium and steel.
Canada and Mexico are the United States' two most significant trading partners as the largest suppliers of aluminium and steel. The United States heavily depends on imported aluminium, with 60 per cent coming from Canada.
Mexico and Canada are also notable steel suppliers to the US, with the former contributing 15 per cent and the latter accounting for 25 per cent of the United States' total steel imports.
Besides a 25 per cent tariff on Mexico and Canada, Trump also plans to impose an additional 10 per cent duty on all products sourced from China. In September this year, the US government already declared a 25 per cent higher tariff on Chinese aluminium, steel, electric vehicle batteries, and other critical minerals. In response to this, the Chinese government recently cancelled export tax rebates on aluminium and copper, which is expected to flame up further deterioration in US-China trade relations.
Repercussions on aluminium and steel prices
According to a team led by Citi analyst Alexander Hacking, Trump's planned tariffs, if implemented, will increase aluminium and steel prices across the United States. While the US steel prices are expected to heighten by $100 to $150 per short tonne, the Midwest premium for US aluminium over the LME price is likely to double to as much as $0.50 per pound.
Counter-attack
Mexican President Claudia Sheinbaum said if Trump's tariffs come into effect, Mexico will come up with retaliatory acts that will more severely impact the economy. According to Citibank, retaliatory tariffs by Mexico will significantly hurt the United States as the latter is a net steel exporter to the former.
