Uncertainty over new tariffs ‘killing’ US steel demand
President Trump’s announcement of potential new tariffs that exceed the initial “reciprocal” rates unveiled on April 2’s Liberation Day has increased uncertainty in the US steel market and the risks to global trade.
Brazil, Canada, the EU and Mexico have received notice that their tariffs could increase further unless trade talks progress ahead of the new August 1 deadline. These “reciprocal” tariffs cannot be applied to US steel imports on top of the existing Section 232 tariffs. However, higher baseline tariffs would raise the cost of US steelmakers’ raw materials, applying upward pressure to steel prices and increasing uncertainty among steel buyers in a climate of low demand.
MEPS US steel market analyst, Laura Hodges, said: “There is not a lot of good news for US steel buyers right now. Interest rates remain high, activity remains cautious and the latest tariff announcements only acerbate this situation.
“We continue to hear from MEPS respondents that it is impossible to plan in this uncertain environment. This ‘wait and see’ approach is killing steel demand.”
Tariff threats aim to accelerate trade talks
Trade negotiations have been slower than the US government anticipated. Originally, a July 9 deadline was set, after which country-specific reciprocal tariffs above a 10% base rate would take effect. Last week, this deadline was extended to August 1.
To accelerate talks, the US government has issued letters outlining new baseline tariff rates to over 20 countries and the EU. Brazil’s rate was raised to 50%, while the EU now faces a 30% tariff, up from 20%, if progress is not made in trade negotiations. Tariffs on Mexico and Canada were increased to 30% and 35% respectively, though these apply only to good that do not comply with the United States-Mexico-Canada Agreement.
So far, only two preliminary trade deals have been announced, with the United Kingdom and Vietnam. Of these, only the UK agreement has been formally communicated, and parts of that deal are now at risk. The UK secured a lower 25% tariff on steel imports into the US. However, this exemption was linked to conditions that must be met by the country’s government by the July 9 deadline. No formal announcement has yet been made and there remains a risk that US tariffs on UK steel imports could revert to the full 50% Section 232 rate.
“Reciprocal” tariffs’ influence on US steel sector
While not directly applicable to steel imports, higher baseline “reciprocal” tariffs could affect US steel demand in several ways. Section 232 tariffs do not cover steelmaking raw materials such as scrap, pig iron and DRI. However, these inputs remain subject to the “reciprocal” tariffs which currently sit at 10% for most countries. Brazil supplies about 30% of total US imports of these materials. If its baseline tariff rises to 50%, it will increase production costs and could weaken downstream demand.
Persistent uncertainty continues to weigh on steel buyers, who have largely stayed on the sidelines, in 2025, as they await clarity on US trade policy.
Against this backdrop of lacklustre demand, respondents to MEPS’s research for its International Steel Review indicate that steel prices have shown limited upward momentum since the doubling of the Section 232 tariff to 50% on June 4. The July contract price for hot rolled coil on the Chicago Mercantile Exchange (CME) reflects this. Having jumped from USD801 per short ton on May 30 to USD923 on June 4, prices have since dropped by almost USD50 per short ton.
With less than three weeks until August 1, the scarcity of finalised trade deals suggest the possibility of yet another extension, prolonging uncertainty and keeping demand sluggish. The likelihood that the 50% Section 232 tariff might be reduced through these negotiations also appears to be decreasing.
US court overrules reciprocal tariffs; Section 232 duties remain in place
In a court ruling issued late Wednesday, May 28, Trump’s reciprocal tariffs, imposed on “Liberation Day” on April 2, and the 25% ad valorem duties imposed on Mexico and Canada and 10% duties on China were overturned.
Trump justified the tariffs under the International Emergency Powers Act of 1977 (IEEPA). But “the court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder,” the ruling said.
“Any interpretation of IEEPA that delegates unlimited tariff authority is unconstitutional,” the court added.
“The court holds for the foregoing reasons that IEEPA does not authorize any of the Worldwide, Retaliatory, or Trafficking Tariff Orders,” the ruling concluded. “The challenged Tariff Orders will be vacated and their operation permanently enjoined.”
The decree “has had a positive impact on global markets and by extension US sentiment,” a US-based source told Fastmarkets.
But the 25% tariffs on steel and aluminum, which went into effect on March 12, remain in place.
Some market participants remain frustrated with the tariffs.
“All we can do is wait and see,” a distributor and former auto buyer told Fastmarkets, who believes that Trump will appeal to the Supreme Court to overturn the ruling and allow reciprocal tariffs to go into effect.
Another source said they “are not feeling anything different” about the tariffs.
The Trump administration has already challenged the court’s overruling. The administration filed a notice of appeal to the Court of Appeals for the Federal Circuit on May 28 following the decision.
Financial markets reacted positively to the news. The Dow Jones Industrial average surged by over 500 points in the futures market on the news but fell back to a modest gain after the market opened at 9:30am.
The S&P 500 saw modest gains in the wake of the ruling, while Nasdaq rose significantly. Both indexes have since fallen.
The US dollar surged following the ruling but quickly lost the gains made, according to the US Dollar Index.
Robert England in Delaware, Amy Hinton and Daniel Hillard in Pennsylvania contributed to this story.
Trump offers 90-day pause on tariffs to 75 nations willing to negotiate
US President Donald Trump offered a 90-day pause in previously announced tariff rates for 75 nations that offered to negotiate with the US to lower tariffs and remove other obstacles facing US exporters, according to an announcement on the president’s social media on Wednesday April 9.
The US imposed tariffs on all trading nations on April 2, a day called “Liberation Day” by Trump, in a negotiating strategy designed to give the US “maxmum leverage” and bring trading partners to the negotiating table, Treasury Secretary Scott Bessent said in a press event following the announcement.
The temporary pause in the tariff rates was provided because several nations offered to negotiate and because trade negotiations “take time,” and the US wants to give each nation the time needed to find a “bespoke” solution, Bessent said.
Participating nations will have temporary tariffs of 10 percent placed on them, effective immediately — substantially lower than the tariff rates announced a week earlier.
In the same social media post announcing the tariff pause, Trump raised the US’ total tariffs on China to 125%, after China imposed a second retaliatory tariff.
“China will realize that the days of ripping off the USA and other countries is no longer sustainable or acceptable,” Trump wrote.
Bessent echoed the president’s view, stating, “China is the most imbalanced economy in the history of the modern world, and they are the biggest source of US trade problems and, indeed, they are problems for the rest of the world.”
China’s neighboring countries have been among the earliest and most determined to seek negotiations, Bessent said, with talks beginning with Vietnam on Wednesday to be followed by talks with Japan, South Korea and India.
The trade talks may also address other matters, including potential collaboration with the US on investing in a potential liquid natural gas (LNG) project in Alaska that could supply gas to South Korea, Japan and Taiwan.
The US’ Section 232 tariffs on steel and aluminium, as well as automotive tariffs, are not part of the trade talks, Bessent said.
“That’s going to remain,” he said.