Should Trump's tariffs take effect, how will they transform the aluminium market?

On February 2, U.S. President Donald Trump announced a 25% tariff on imports from Canada and Mexico, alongside an additional 10% duty on Canadian energy products, including oil, natural gas, and electricity. Besides, a 10% tariff is imposed on Chinese imports, including aluminium products, on top of existing duties.

From November 2024, when Trump secured his re-election victory, until late January 2025, the Midwest Premium had only increased by 12%, reaching only $530/t. Compared to the 90% surge in 2018 when Trump’s first administration imposed a 10% tariff on aluminium imports, this recent price movement has been somewhat more measured—suggesting that the market initially had doubts about the actual implementation of the tariffs. Some market participants view these tariffs as political leverage aimed at pressuring Canada and Mexico over border security and illegal immigration issues, rather than purely economic protectionism. However, on February 3, right after the announcement, the US Midwest Premium surged 17% from the previous trading day to $617/ton.

Canada retaliated swiftly, announcing a 25% counter-tariff on $30 billion worth of U.S. imports, also scheduled to take effect on February 4.

However, just hours before implementation, the U.S., Canada, and Mexico reached an agreement to delay the tariffs by 30 days, while the additional 10% duty on Chinese imports proceeded as planned on February 4.

What could happen if the tariffs are enforced in full a month from now? What would be the implications for global aluminium markets?

Canadian aluminium may redirected to Europe

The United States remains a net importer of aluminium, with limited domestic smelting capacity. Currently, only four aluminium smelters are operational in the country, with 2024 primary aluminium production estimated at 690,000 tons while imports reached 1.86 million tons.

Canada dominates U.S. aluminium imports, accounting for 93.75% of total primary aluminium imports in 2024, equivalent to 1.55 million tons. Given this significant reliance, a 25% tariff increase would directly lift aluminium prices in the U.S. market and be highly reflected in the U.S. Midwest premium.

As a result, Canadian aluminium will likely be redirected to alternative markets, particularly Europe. Alcoa’s CEO mentioned in the Q4 earnings call that should the U.S. impose tariffs on Canadian aluminium, the company would reallocate its Canadian production to European markets. Alcoa operates two smelters in Canada with a combined capacity of 600,000 tons.

Indeed, early signs of this shift are already appearing. A fortnight ago, European spot market traders told SMM that offers from Canadian aluminium traders were already appearing in Europe. The Rotterdam P1020A duty-paid premium has declined from $370/ton in early January to $320–330/ton so far. If Canadian primary aluminum continues to flow into Europe, prices will fall further amid weak demand. In fact, Europe faces a greater shortage of semis than ingots. The two leading processing companies in Europe, Novelis and Constellium, prefer to purchase scrap to comply with the trend of decarbonization.

Fig 1: U.S. Primary Aluminium Imports by Origins

Fig 2: Canada's Primary Aluminium Exports by Destinations

U.S. Buyers seek alternatives in the middle East and India, but supply gaps may persist

Once the tariffs take effect, U.S. Aluminium buyers have to turn to the Middle East and India for alternative supply. These two regions account for 37% of total aluminum production outside of China in 2024. Besides, some Australian aluminum ingots may also be exported to the U.S. However, several constraints may limit the availability of these sources.

Fig 3: Share of primary aluminium production by country in 2024 (Ex. China)

In recent years, Europe has intensified sanctions on Russia. Additionally, many European buyers have voluntarily restricted their purchases of Russian primary aluminium, further tightening available supply. As a result, Middle Eastern aluminium producers have increased their shipments to Europe, with a significant portion secured through long-term contracts. Given the absence of new smelting capacity investments in the Middle East, the region’s ability to redirect additional volumes to the U.S. remains highly constrained.

Similarly, Vedanta, the only capacity addition in India, is expanding its BALCO smelter capacity by 435,000 tonnes, which is expected to come on stream in the second quarter of 2025. With both Middle Eastern and Indian supply growth limited in the near term, these regions are unlikely to fully replace the aluminium Canada previously supplied to the U.S., leaving a potential supply gap in the American market. Which means, U.S buyers have to increase price to attract aluminium, which also put a heavier cost to their downstream consumer. Moreover, primary aluminium supply in Asia is tightening due to China's previous announcement of the tax rebate policy on aluminium products exports from December 1st, 2024. Japan's MJP premium was priced at $228 in Q1 2025, up 30% QoQ due to supply concern. Now, the potential change in trading flows will exacerbate the tightness of the Asian market, posing an upside risk to Asian market prices.

SMM believes that the U.S. may impose tariffs on key metals from even more countries in the future. If such measures are implemented, U.S. downstream buyers will face higher costs across multiple sectors. Given these dynamics, the U.S Midwest Premium is expected to face significant upward pressure throughout 2025, as supply constraints continue to drive market tightness.

Escalating global trade war risks heightened market volatility

The U.S. tariffs on Canada, Mexico, and China are poised to do more than just impact the aluminium market—they could also set off a chain reaction across a broad spectrum of commodities. Canada has already implemented swift, retaliatory measures, and the Mexican government is reportedly weighing similar actions.

In parallel, China has announced its own countermeasures. Starting February 10, China will levy a 15% tariff on U.S. coal and liquefied natural gas (LNG) and a 10% tariff on crude oil, agricultural equipment, and certain automobiles. Clearly, China gave U.S a week to negotiate. Given that the protracted U.S.-China trade frictions had already effectively severed trade ties of aluminium products between the U.S. and China—currently the largest exporter of those—this escalation in tariff policy is expected to further intensify tensions in U.S.-China trade relations. In 2024, China's exports of flat-rolled products to the U.S. made up only 5% of total exports, while aluminum profiles accounted for just 0.98%. Currently, the vast majority of semi-finished products exported to the U.S. face tariffs of 30% or higher, with some subject to anti-dumping duties of around 60%

Fig 4: Only 6% of China's aluminum semi products export to the US in 2024

If the tariff impasse between the U.S., Canada and Mexico remains unresolved after a 30-day delay and eventually be implemented, the result could be a much broader global trade conflict. Trump has already hinted at the possibility of imposing additional tariffs on the European Union and other countries. In response, nations might adopt a range of strategies—from direct retaliatory measures to restructuring their trade relationships with the U.S., China, and other key partners. Globally, such developments could lead to significant inflationary pressures and severe disruptions in supply chains. The trading flow of global aluminium products could be further reshaped.

Author: Xinyi Liu | Aluminium Analyst | London Office, Shanghai Metals Market

Email: cathyliu@smm.cn