Mihir Torsekar: Getting It Right on Steel and Aluminum Tariffs

The global economy is changing rapidly, particularly regarding emerging technologies such as artificial intelligence, solar panels, electric vehicles, and large-capacity batteries. However, even as the United States looks to compete in these advanced industries, it’s important to remember the two building blocks that undergird them: Steel and aluminum. For years, however, U.S. production of these critical metals has lagged, allowing China to become a juggernaut; the country now produces more than half of the world’s steel and aluminum.

President Trump’s announcement of 25% tariffs on all steel and aluminum imports last month is an important step toward reversing these trends. His policies build on the initial successes of the 2018 tariffs, invoked under Section 232 of U.S. trade law, which imposed duties of 25% on steel imports and 10% on aluminum imports.

The 2018 tariffs immediately relieved U.S. producers struggling from years of competition with subsidized imports and Chinese overproduction. In the wake of the tariffs, America’s steel producers invested roughly $20 billion in more than 15 new steel furnaces and mills, creating over 4,000 new jobs.

Similarly, domestic primary aluminum production surged 40% in 2018—and remained elevated into 2022. The U.S. aluminum industry’s pledged investments in 2021 and 2022 alone exceeded total investments made in the prior 10-year period. Essentially, the Section 232 tariffs saved what was left of America’s primary aluminum industry—which had fallen from a peak of 23 domestic smelters in 2000 to a mere five at the time the tariffs were introduced.

Unfortunately, these gains were short-lived.

In the past few years, an array of duty-free exemptions for key countries and on thousands of products dampened the effectiveness of the tariffs. By the start of 2025, for example, various exclusions had reduced the 25% steel tariffs to an effective rate of 3.6%. For primary aluminum, the effective rate plunged from 10% to only 0.8%.

Foreign suppliers responded to the country’s exclusions by diverting exports from other markets and into the United States. At the same time, a widening list of product exclusions led to the erosion of U.S. market share for downstream aluminum products. This was doubly painful since U.S. producers were already competing against dumped products from Mexico and others, according to a U.S. Department of Commerce investigation.

Overall, this steady erosion of the effectiveness of the tariffs created investment uncertainty in the United States. That’s a real problem since the restarting of an idled U.S. aluminum smelter requires hundreds of millions of dollars in new funding and three to five years of sustained profitability. But that has become nearly impossible, considering the recent surge of aluminum imports that has rendered roughly half of U.S. smelting capacity unprofitable. In fact, from 2020-2024, three more U.S. smelters were idled or closed.

Each year, China produces more steel and aluminum than the rest of the world combined. And since China’s real estate market is in shambles—and its domestic consumption is virtually nonexistent—Beijing urgently needs global markets to absorb excess Chinese production, including finished steel exports that reached a nine-year high of 110 million metric tons in 2024 alone.

President Trump’s proposed tariffs on steel and aluminum imports are the right policies to fight back. However, these tariffs will only be effective if they remain comprehensive. By raising aluminum tariffs to match those of steel—and disallowing exclusions for countries and products—the Trump administration has taken an important step toward rebuilding America’s steel and aluminum industries, safeguarding U.S. national security, and stabilizing domestic supply chains.