Morgan Stanley: Aluminum tariff hikes may push up aluminum prices and costs for its users, increasing the likelihood of imposing additional tariffs on copper

Analysts from Morgan Stanley stated that US President Trump's decision to double aluminum import tariffs to 50% could drive up aluminum prices and the costs for its users.

Analysts noted that using a premium benchmark of 20¢ per pound for consumers purchasing aluminum in the US physical market, raising tariffs to 50% would "imply further aluminum price increases in the future to maintain metal inflows" into the US.

On June 2, the Midwest duty-paid aluminum premium in the US reached $0.58 per pound, or $1,279 per mt, surging 54% from May 30, when Trump announced his plan to raise aluminum and steel tariffs starting June 4.

Goldman Sachs analysts stated that the premium must rise to between $0.68 and $0.70 per pound to fully reflect the impact of the tariff increase.

In a report to clients, Morgan Stanley wrote that Trump's tariffs could also affect spot aluminum purchases in the US, as consumers may wait to see if there will be a reversal or exemptions to the policy. The US imports a significant amount of aluminum.

They added that if surplus metal is diverted to other regions, premiums there could also be suppressed. The US government initially imposed a 25% tariff on aluminum, leading some producers to divert aluminum to Europe, triggering a decline in European aluminum premiums since early 2025 and supporting the flow of aluminum scrap from the EU to the US.

Strategists stated that the market also appears to be betting that the increase in aluminum tariffs will raise the likelihood of tariffs on copper imports, which the Trump administration is currently investigating under Section 232 of the Trade Expansion Act of 1962. This could serve as a justification for imposing tariffs on specific industries aimed at promoting domestic production of goods critical to national security.

However, Morgan Stanley analysts believe that if tariffs on copper are announced, recent US copper stockpiles could mitigate their impact on prices.