The latest hike to 50% tariffs when it comes to steel and aluminum imports is going to do one thing – make almost everything more expensive. Which means higher costs for businesses and higher prices for consumers, as well as inflation pressures, which risk slowing down the economy and also growing the borrowing expenditures.
The fact is that tariffs are taxes. US consumers as well as businesses pay them. And while steel and aluminum are not things that people buy directly, they are essential inputs when it comes to things we buy, such as appliances, electronics, cars, packaging, construction materials, etc. It is well to be noted that there are two main base tariffs on steel and aluminum that appear in consumer goods– as core inputs when it comes to the product itself, like steel in an oven or aluminum in a laptop body, and as packaging, such as steel cans for vegetables or aluminum for soda as well as beer.
It happens to be a straightforward dynamic. When the input expenditures go up, the product prices do too. The price hike is not immediate since the business will first burn Through the pre-tariff inventory, which they stockpiled in order to shield customers and also buy time. However, once that inventory is out, companies will be forced to pay the tariff-inflated rates, and those expenditures are going to be passed on to the consumers.
And by the way, these are not small increases. For many categories, the effect is going to be quite prominent. Put it into the right perspective: the Fed gets nervous when the inflation goes on to hit anywhere between 3 and 4%. This latest round of tariffs has just doubled the tax on steel and aluminum to 50%.
So how bad can it get?
In case one is a US manufacturer and is making products, which are mostly steel or aluminum, like metal framing, or even beverage cans, the cost of goods sold (COGS) has already gone up by 20% as of June 4, 2025. If steel or aluminum accounts for even 50% of the COGS, like in the case of home appliances or laptops with aluminum enclosures, the cost is already increased by almost 10%.
It is well to be noted that a 20% hike is almost 8 times the present US inflation rate. And that is for goods that are manufactured domestically. If one is importing the finished goods, with numerous stacking tariffs at play, the rise is going to be all the more significant.
There are some manufacturers who are trying to reduce the exposure by way of revising the product designs and also replacing metal with certain alternative choices wherever possible. Apparently, packaging is a common target. One can anticipate a favorite holiday tin of cookies to arrive in probably shrink wrap or cardboard in 2025. Not as elegant, but of course cheaper and potentially the difference between what the consumer buys and passes.
Apparently, Pepsi has already flagged that the higher cost of aluminum may as well lead to greater usage of plastic packaging. The fact is that they already bottle in plastic, so manufacturing disruption is going to be minimal. However, the downstream retailers with shelves that are built especially for cans are now going to incur the switching costs.
Still, there are many products for which steel and aluminum are non-negotiable. If one manufactures front loader buckets or even car frames, there is no plastic or wood involved. The fact is that in most of the tariff environments, companies are looking forward to transitioning their sourcing away from countries having higher tariffs towards the ones with more favorable terms. But in this case, almost a 50% tariff applies to all the countries, and the point is that swapping a Chinese supplier for a Canadian one is going to offer no relief.
The only move forward would be sourcing more domestic steel and aluminum since the tariffs give US producers a pricing edge. Although it sounds great in theory, in practice, they simply cannot meet the demand.
Can the domestic supply scale?
At present, almost 25% of US steel as well as 50% of US aluminum is imported from overseas. Around all of that, aluminum happens to come from Canada, and hence this is a big supply gap to fill. Interestingly, companies can go ahead and build more US steel and aluminum plants. However, only if they are willing to play the long game. It is a big hurdle since these industries are capital intensive and also slow moving. They need new grid infrastructure along with a massive amount of power, which is something that is already under a lot of pressure from crypto industries as well as AI.
Even if the businesses break ground in the days to come, new capacity is going to take years, if not decades, to come online. The near-term gap is also unavoidable, and if history tells us anything, the long-term gains are not guaranteed at all.
Still, the biggest risk by far to investment within domestic steel as well as aluminum production happens to be the uncertainty in policies. The tariffs that are imposed today may well be gone tomorrow. This is not a conducive environment when it comes to long-term billion-dollar investments.
The competitive risk
It is well to be noted that when the Trump administration went on to impose 25% tariffs on steel and 10% tariffs on aluminum in 2018, the assumption was that the domestic output could also increase. Rather, the US production of both the elements fell down by 15% in the case of steel and 10% for aluminum.
And due to the fact that they are fungible commodities, a 50% tax on imports goes on to mean the price of domestic steel and aluminum is going to rise as well. History goes on to show that domestic producers alter prices right below the new import expenditure. That is how the commodities work. So even if someone is buying American, they’re still going to pay a little more.
The downstream effect happens to be that US manufacturers of products having steel or aluminum inputs are going to become less competitive as compared to the foreign players. In order to compensate, industry lobbyists are going to push for carve-outs as well as targeted protection. A perfect instance is the announcement by the administration of a 50% tariff on the steel content of imported home appliances, which took effect on June 23, 2025. In an almost paradoxical circular way, this kind of tariff goes to protect domestic manufacturers, which have been disadvantaged by the earlier doubling of steel tariffs.
This new tariff, of course, only applies to the metal components and not the entire product. But if someone is planning for a complete kitchen renovation, like installing the new fridge or washer or stove, the cost has just gone up.
It is just another reminder that tariffs happen to be the taxes.
So, what should the business do?
There are three ways in which companies should be taking the steps so as to protect themselves –
1- Get visibility: If one is managing sourcing as well as trade exposure in spreadsheets, it is time to modernize. Invest in real-time tools in order to know what is taking place in the constantly shifting spectrum of tariffs, which happens to be the most fluid trade environment in the last 80 years.
2- Make sure to connect the trade data back to the supply chain: Real-time tariff visibility happens to be a very significant first step. However, it is not enough. There are better decisions that come from knowing what needs to be done with changing tariff information, such as how to alter sourcing and inventory and also planning since the political changes keep on continuing.
3- Rapid action: Whether it is stockpiling when it comes to tariffs getting delayed or altering the sourcing in response to a much more favorable ruling, it is important to move fast well before the policy transitions again, and the companies that do that are going to come out strong.
What’s the ultimate outcome?
The fact is that uncertainty is indeed the reality of the world going forward, at least for the foreseeable future. This kind of latest escalation of tariffs on steel and aluminum to 50%, along with the July 9 announcement, goes on to send a larger message – the US trade posture is no longer predictable, even for those who are very close to the US. Because of abrupt policy alterations that are taking place without warnings, businesses are learning to treat the risks related to geopolitics as a core element in supply chain planning as well as operations.
However, in this scenario, there are no good answers and fewer bad ones. Everyone is indeed getting hurt. Although there is no escaping this reality, the right thing is to take steps to move fast and be less hurt as compared to your competition, and in doing so, get a competitive advantage.
