In a speech to Republican lawmakers yesterday, Trump said he would impose tariffs on aluminium and copper – metals that are needed to produce US military hardware – as well as steel, to entice producers to make them in the US.
“We have to bring production back to our country,” he said.
Trump won the US presidency in November vowing to lower costs for consumers still smarting from an inflation surge in the first half of his predecessor Joe Biden’s term.
However, analysts argue his plan for tariffs on imports to bolster the country’s manufacturing sector, another of his promises, may undercut his price-cutting pledge.
It was not clear how broadly the tariffs could be applied, but several mining CEOs have previously said they are preparing for different scenarios as markets brace for a potential change to trade flows.
“There’s a few unknowns here. Will these tariffs be enacted, and at what scale, and who will pay?
“Ultimately they generally get paid by the consumer particularly in the case where there’s no domestic substitute,” said analyst Daniel Morgan at Sydney investment bank Barrenjoey.
He said US aluminium and copper smelters have been closing and would need new infrastructure and power contracts to restart, among other measures, all of which take time.
Aluminium producers in Canada such as Rio Tinto and Alcoa would be unlikely to take revenue hits, instead the costs would likely be rolled to automakers who would then pass them to US consumers, he added. Rio Tinto declined to comment.
An Alcoa spokesman pointed to comments from CEO William Oplinger from a results call last week that flagged the potential for “wide ranging effects on supply, demand and trade flows”.
He estimated that a 25% tariff on current Canadian export volumes to the US could represent US$1.5 billion to US$2 billion of additional annual costs for US customers.
On copper, John Fennell, CEO of the International Copper Association Australia said any tariff on imports to the US would impact its industry given the country is a net copper importer, although it may speed the development of new mines such as Rio Tinto’s Resolution in Arizona.
“This could be good for new mines like Resolution but that is many years off, and the pain would be felt by local manufacturers paying the tariffs in the interim,” he said.
Freeport-McMoRan CEO Kathleen Quirk said last week that the miner would not be affected by any copper tariffs as they sell all their US copper domestically and their Indonesian metal goes to Asia.
However, she worried about any potential inflationary effects of copper tariffs.
“In Japan, the world’s third-largest steel maker, steel and aluminium tariffs during Trump’s previous term had a limited impact,” noted Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting.
“The majority of Japan’s steel exports are value-added specialty products and since value-added products were excluded, we expect a similar approach this time.
“These value-added products are difficult to substitute, making them less likely to be targeted,” Akuta said.