Is the US considering lowering steel and aluminum tariffs? What does this mean for metals?

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Recently, there have been market rumors that the U.S. is considering lowering tariffs on certain steel and aluminum products. In response, Morgan Stanley stated that even if tariff adjustments do occur, their impact would be extremely limited.

On February 14, according to Xinhua News Agency, several U.S. media outlets recently reported that the Trump administration is considering reducing tariffs on some steel and aluminum products to ease Americans’ concerns over rising prices and to "pave the way" for the upcoming midterm elections.

On February 14, according to Chase Wind Trading Desk, Morgan Stanley stated in its latest research report that the policy adjustment only targets the metal content in derivative products, while primary metals will continue to face a high tariff of 50%. The key point of this rumor is: LME aluminum prices and the U.S. Midwest premium are expected not to be materially affected, and U.S. aluminum producers such as Alcoa will continue to be protected in the short term.

The report noted that Morgan Stanley believes in the steel sector, long steel producers (such as CMC and Gerdau NA) would be less affected than flat steel producers (such as STLD, NUE, and CLF). Most importantly, this potential policy adjustment does not mean a reduction in the likelihood of the 15% copper tariff.

Evolution of Steel and Aluminum Tariff Policy: From 25% to an Aggressive 50% Path

The report says U.S. steel and aluminum tariff policy has undergone rapid escalation.

In early 2025, the U.S. imposed a 25% tariff on steel, aluminum, and their derivatives; by June, this rate doubled to 50%.

In August, the government further added about 400 customs codes to the tariff list, expanding the scope to many manufactured goods—aluminum or steel contained in these products faces a 50% tariff, while the rest of the product is taxed at the corresponding tariff rate of the country of origin.

Notably, U.S. companies have actively lobbied for more products to be added to the tariff list. According to media reports, manufacturers of mattresses, cake pans, and bicycles have all applied for additional tariffs on related goods. Morgan Stanley stated this mechanism has continuously expanded the list of affected goods, increasing the complexity of customs clearance and business costs.

According to the report, the rumored policy adjustment seems aimed at narrowing the list of affected products, with a focus on consumer affordability. However, Morgan Stanley emphasized that this does not mean a change in tariffs on primary metals—the 50% base tariff rate is expected to remain unchanged.

This policy design may have unintended consequences: Imported metals face a 50% tariff, while foreign manufactured goods may only face a lower corresponding tariff. This difference may weaken the competitiveness of manufacturing certain products in the U.S., running counter to the original intention of trade protection.

Impact on the Aluminum Market: Supply and Demand Structure Remains Largely Unchanged

America’s high dependence on aluminum imports is key to understanding the impact of this policy. About 80% of U.S. domestic aluminum demand relies on imports; from January to November 2025, 3.1 million tons of primary metals and sheet, foil and other products were imported.

Morgan Stanley believes, even if derivative product tariffs are lowered, there will be no impact on LME aluminum prices. Indeed, since the tariffs were imposed last March, U.S. imports have already weakened, indicating a degree of destocking and demand destruction.

Likewise, the U.S. Midwest premium will not be directly affected, as the U.S. will still rely heavily on aluminum imports. The premium has recently risen above $1/lb (over $2,200/ton), seeking to attract metal supply from Canada.

Morgan Stanley states that only when tariff cuts extend to primary metals will the market face downward pressure—which currently seems unlikely.

The bank also stated, for domestic aluminum producers like Alcoa, they will continue to receive tariff protection in the short term. As LME prices and Midwest premiums are expected to remain stable, these firms’ profitability will not be directly impacted. However, if the policy adjustment is eventually implemented, the long-term impact on manufacturing needs to be continually monitored.

In the steel sector, the market impact will show clear structural differentiation. Long steel producers such as CMC and Gerdau NA are expected to be less affected because construction-related long steel products rarely involve imported derivative steel products.

In contrast, flat steel producers such as STLD, NUE, and CLF face greater risk. Flat steel is widely used in consumer product manufacturing—the core area potentially involved in this tariff adjustment. However, Morgan Stanley estimates steel prices will remain high as long as the 50% tariff stays in effect.

Notably, Morgan Stanley says steel producers face more complex situations. While the 50% tariff provides a price umbrella for domestic producers, a potential reduction in consumer goods import tariffs may weaken downstream demand—a chain reaction to be watched.

Copper Tariff Prospects: Independent Event or Chain Reaction?

The report says another market focus is: Whether the adjustment in steel and aluminum tariffs implies a change in the potential 15% copper tariff policy? Morgan Stanley gave a negative answer.

Morgan Stanley believes since this measure only targets derivative products and primary metal tariffs remain unchanged, it has no reference value for copper tariff prospects.

However, the market has already begun pricing in a lower possibility of copper tariffs. Currently the COMEX-LME spread is negative for nearby contracts, while December 2027 COMEX copper prices are only 6% higher than LME, significantly below the potential 15% tariff.

The market currently expects to receive clear news on copper tariffs around mid-2026.

Risk Warning and DisclaimerThe market carries risks, and investment should be approached cautiously. This article does not constitute personal investment advice, nor does it consider individual users’ specific investment goals, financial situations or needs. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investment based on this is at your own risk. ```