Steel buyers enter the era of tariffs as ships change routes and trucks stop running.
On Tuesday, a cargo ship from India arrived at the busy Port of Tampa Bay carrying hundreds of tons of aluminum bound for several U.S. terminals. Suddenly, all the cargo needed to be unloaded at the station.
The ship, loaded with aluminum for window frames and truck parts, was scheduled to stop in Mobile, Alabama, and Houston, but the logistics provider’s customers canceled the remaining destinations because U.S. tariffs took effect the next day.
Such unrest has been repeated across the country since President Donald Trump’s move to impose tariffs on steel and aluminum took effect. From the Florida coast to the American heartland, automakers, builders and consumers have been widely affected.
Starting at 12:01 a.m. Wednesday, U.S. Customs and Border Protection began collecting a 25% import tariff on all raw steel, aluminum and other products. Jose Severin, director of business development at logistics provider Mercury Resources, said that to speed up the implementation of the tariffs, shippers in Tampa Bay realized that it was cheaper to deliver Indian aluminum to other destinations on expensive flatbed trucks than to pay the tariffs the next day.
“One customer had a ship that had three stops in the U.S. and he had to deliver all his cargo at the first stop because he couldn’t get to the second stop before paying the tariffs. It was really confusing,” Severin said.
The cost of buying U.S. steel has risen to its highest level in more than a year since Trump took office. The increase in freight rates paid by U.S. aluminum consumers has led Ford Motor Co. to warn that it could “create a void in the industry.” Canada and Mexico, the two largest sources of U.S. imports, are threatening massive retaliatory measures that would only further undermine the integrated supply chain that the North American industry has built over decades and rebuilt in recent years.
Canada-based Algoma Steel Group, a major U.S. steel supplier, responded quickly to the tariffs. After five hours of confusion as Trump suddenly announced and then reversed his decision to double tariffs on Canadian metals, CEO Michael Garcia said his trucks had stopped crossing the border before the deadline and temporarily stopped shipping while waiting for relief.
Dan Demar, sales manager for Heidtmann Steel Products, said most of the Canadian metal that crosses the border is destined for Detroit. He added that his team is “under pressure” to get as much cargo as possible from its northern neighbor.
Once foreign minerals enter the U.S., companies like his must pay a 25% tariff, Demar added. His company then sells the raw materials to equipment manufacturers, who turn the steel into auto parts. In both steps, the previous sellers bear the burden of downstream tariffs.
Demar added that the metal parts are ultimately purchased by companies like Ford, which ultimately pay the tariffs. “Ford is not going to disrupt a supply chain that took years to build to avoid these tariffs,” Demar said. “These tariffs will be applied to the last component of the car that ends up in the hands of the end user.”
Heidtmann noted that Trump’s claim that the tariffs were to help U.S. manufacturers appears to be working. Demar said that as of Wednesday morning, his company has begun sourcing only from U.S. manufacturers to avoid the tariffs.
U.S. steelmakers are having their worst year since Trump’s first term, with weak construction demand, inflation and rising borrowing costs dealing a triple whammy to profits. With domestic steel prices up more than 30% this year, those funds will flow directly into steelmakers’ coffers, while shares of Century Aluminum, the nation’s only remaining aluminum maker, have risen 6.5% this year.
With U.S. steel capacity running at just 75% and two aluminum smelters idle since the pandemic began, analysts believe U.S. metal makers could expand a lot of spare capacity to offset the tariff-induced drop in imports. And that seems to be exactly what Trump wants.
However, major trade allies remain frustrated. Brazil, the world’s second-largest steel importer, has warned that tariffs will cause its steel exports to shift to other countries. Brazilian steel industry association Aco Brasil said U.S. tariffs send a warning to countries hit by a flood of cheap metal imports. China is the world’s largest steel producer, with exports near record highs last year.
The worry about tariffs is that excess supply from China and elsewhere will be diverted to other markets where demand remains stagnant.
