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Donald Trump’s recent announcement that steel and aluminium imported into the United States would now be subject to tariffs of 25% has caused a flurry of consternation among affected nations and exporters while receiving an unsurprisingly warm welcome from local steel makers.
The policy should not itself be surprising, given Trump’s comments during the election cycle that tariff was “the most beautiful word in the dictionary.”
Indeed, since his inauguration, this issue has become a focal point, with imports from China hit with a tariff of 10%, while both Mexico and Canada were threatened with 25% on their imports into the U.S. – although the latter policy has been postponed for now.
In response to the announcement on metal imports, Prime Minister Anthony Albanese got on the phone to Trump, hoping to exempt Australia from the regime – as Malcolm Turnbull had done during the previous Trump administration.
Exemption was now “under consideration,” according to Albanese: An optimistic development, considering Australia’s growing role as an exporter of aluminium – with 83,000 sent in 2024, in addition to 223,000 tonnes of steel.
China issued its own retaliatory response to the 10% tariff policy, announcing products such as liquefied natural gas, coal, crude oil, and farm equipment coming from the U.S. would be slugged with a 15% levy.
Blast from the past
Trump’s tariffs on various countries – including the U.S.’s main trading partners – is not only a repeat of what he did the last time he was in the White House, but it also signals a rejection of free trade policies on the whole, despite their dominance for a good portion of the 20th century, and the whole of the 21st.
Going all the way back to between 1798 and 1913, tariffs constituted 50% to 90% of U.S. federal revenue, but trade liberalisation in the following decades (which became embedded from the 1930s) caused this to shrink. In the past 70 years, tariffs have rarely accounted for more than 2% of federal revenue.
But how useful are they as an economic policy?
On one hand, tariffs are a useful negotiating tool with trade partners who rely on American consumers to buy their goods. On the other hand, they often introduce higher costs for consumers and companies within the U.S.
It’s certain, however, that with the world’s largest economy shifting into this gear, other countries – and the businesses in them – will be reshaping how they trade.
Responding to the new tariff regime
With countries like Mexico and especially China facing levies on imported goods, several firms previously operating from there have closed up shop and moved manufacturing and other business activities elsewhere.
Often, it has been countries in Southeast Asia that have benefited from this shift, with Vietnam becoming a hot spot for clothing manufacturers, while Thailand has become home to factories that build electric vehicles – including those for Chinese EV companies, and Malaysia has become increasingly preferred for logistics.
To understand what it will mean for the steel and aluminium industries – both globally and within the U.S. domestically, it’s important to recognise that imported steel accounts for a quarter of the metal used in the State; for aluminium, the figure is around 50%.
For steel, the top three suppliers are Canada, Brazil, and Mexico. Canada is also in top spot when it comes to aluminium – supplying nearly 40% of U.S. imports, while the United Arab Emirates and China are the second and third top suppliers.
During his first term as President, Donald Trump placed a 25% tariff on steel imports and a 10% one on aluminium coming into the U.S.
This pushed up local steel prices – boosting the short-term fortunes of American firms – but also passing on costs to industries such as construction and producing a glut of U.S.-produced steel on the market.
But industry figures responded positively to the recent policy, with Steel Manufacturers Association President Philip K Bell remarking, “The steel industry in America faces serious threats from foreign actors that seek to destroy domestic production.”
He also suggested that the 25% tariffs would go some way to levelling the playing field for local manufacturers and workers.
Magnum looks to leverage
Among the companies aiming to capitalise on the tariff regime is Magnum Mining and Exploration Ltd (ASX:MGU), which owns the fully permitted Buena Vista mine in Nevada.
In the same week of Trump’s announcement on steel tariffs, Magnum’s board kicked off a comprehensive review of its supply strategy, putting the spotlight on opportunities to supply ore locally within the U.S. market.
The review took non-executive director Neil Goodman to China, where he met with members of The Luli Group, which owns major steel manufacturer Shandong Luli Iron and Steel Co. Luli recently purchased a technology IP and plant associated with the HIsmelt process used by Magnum on its Buena Vista ore, and the company’s discussions with Mr Goodman form an important part of Magnum’s ongoing work to strengthen its supply chain resilience and explore avenues for supplying high-quality raw materials to the North American market.
Buena Vista has been moved successfully along the development pathway with the completion of a scoping study and technical feasibility refresh, both in August 2023. The former showed the 232 million-tonne resource could be processed into a Direct Reduction Iron grade concentrate, while the latter indicated this concentrate would be suitable for transformation into pig iron using the HIsmelt technology.
Chairman Luke Martino said the company would focus on adapting its plans to the current tariff policies.
“With the U.S. reinforcing its commitment to domestic production, Magnum is proactively assessing how best to align our supply chain strategy to meet market demands,” he said.
“Our goal is to continue delivering high-quality iron ore solutions while maintaining a competitive edge in a shifting trade environment.”
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