Is the U.S. considering lowering steel and aluminum tariffs? What does this mean for metals?

Recently, there have been rumors in the market that the United States is considering lowering tariffs on certain steel and aluminum products. In response, Morgan Stanley stated that even if tariff adjustments do occur, their impact will be very limited.

On February 14, according to Xinhua News Agency, several U.S. media outlets reported that the Trump administration is considering reducing tariffs on certain steel and aluminum products to alleviate public concerns about rising prices and to "pave the way" for the upcoming midterm elections.

On February 14, according to the Chasing Wind Trading Desk, Morgan Stanley stated in its latest research report that the policy adjustment only targets the metal content in derivative products, while primary metals will still face a high tariff of 50%. The key point of this rumor is that LME aluminum prices and Midwest premiums in the U.S. are not expected to be significantly impacted, and U.S. aluminum producers such as Alcoa will continue to be protected in the short term.

The research report pointed out that Morgan Stanley believes that in the steel sector, long steel producers (such as CMC and Gerdau NA) will be less affected than flat steel producers (such as STLD, NUE, and CLF). Most importantly, this potential policy adjustment does not imply a reduced likelihood of the 15% copper tariff.

Evolution of Steel and Aluminum Tariff Policy: From 25% to 50% Aggressive Path

The research report states that the U.S. steel and aluminum tariff policy has undergone rapid escalation.

At the beginning of 2025, the U.S. implemented a 25% tariff on steel, aluminum, and their derivative products, which doubled to 50% by June.

In August, the government further included about 400 customs codes in the tariff list, expanding the scope of tariffs to numerous finished products—those containing aluminum or steel will face a 50% tariff, while the remaining parts of the products will be taxed at the equivalent tariff rate of the country of origin.

It is noteworthy that U.S. companies are also actively lobbying to include more products in the tariff list. According to media reports, mattress, cake mold, and bicycle manufacturers have all applied for additional tariffs on related products. Morgan Stanley stated that this mechanism has continuously expanded the list of products affected by tariffs, increasing the complexity of customs clearance and corporate costs.

According to the research report, the rumored policy adjustment seems aimed at narrowing the list of products affected by tariffs, focusing on consumer affordability. However, Morgan Stanley emphasized that this does not mean a change in tariffs on primary metals—the 50% baseline tariff rate is expected to remain unchanged.

This policy design may have unintended consequences: imported metals face a 50% tariff, while foreign finished products may only face lower equivalent tariffs. This rate difference could undermine the competitiveness of manufacturing certain products in the U.S., contrary to the original intention of trade protection.

Impact on the Aluminum Market: Supply and Demand Dynamics Remain Essentially Unchanged

The U.S. aluminum market's high dependence on imports is key to understanding the impact of this policy. Approximately 80% of domestic aluminum demand in the U.S. relies on imports, with 3.1 million tons of primary metals, as well as products such as sheets and foils, imported during the period from January to November 2025 Morgan Stanley believes that even if the tariffs on derivative products are reduced, it will not affect LME aluminum prices. In fact, since the implementation of tariffs in March last year, U.S. import volumes have weakened, indicating a certain degree of destocking and demand destruction.

Similarly, the Midwest premium in the U.S. will not be directly impacted, as the U.S. will still heavily rely on aluminum imports. This premium has recently risen to over $1/pound (over $2,200/ton), attempting to attract metal supplies from Canada.

Morgan Stanley stated that the market will only face downward pressure when tariff reductions extend to primary metals—an outcome that currently seems unlikely.

The firm also noted that domestic aluminum producers such as Alcoa will continue to be protected by tariffs in the short term. Since LME aluminum prices and the Midwest premium are expected to remain stable, the profitability of these companies will not be directly impacted. However, if tariff adjustment policies are ultimately implemented, the long-term effects on the manufacturing sector will need to be continuously monitored.

In the steel sector, market impacts will show significant structural differentiation. Long product steel manufacturers such as CMC and Gerdau NA are expected to be less affected, as long product steel products related to construction involve fewer imported derivative steel products.

In contrast, flat steel manufacturers such as STLD, NUE, and CLF face greater risks. Flat steel is widely used in consumer goods manufacturing, which is precisely the core area that this tariff adjustment may involve. However, Morgan Stanley expects that steel prices will remain high under the 50% tariff scenario.

It is worth noting that Morgan Stanley stated that the situation for steel manufacturers is more complex. While the 50% tariff provides a price umbrella for domestic producers, the potential reduction of import tariffs on consumer goods may weaken downstream demand, and this chain reaction is worth monitoring.

Copper Tariff Outlook: An Independent Event or a Chain Reaction?

The research report highlights another focus of the market: Does the adjustment of steel and aluminum tariffs indicate a potential change in the 15% copper tariff policy? Morgan Stanley provided a negative answer.

Morgan Stanley believes that since this measure only targets derivative products and the tariffs on primary metals remain unchanged, it has no reference significance for the outlook on copper tariffs.

However, the market has already begun to price in the decreasing likelihood of copper tariffs. Currently, the COMEX-LME price spread in near-month contracts is negative, and the December 2027 COMEX copper price is only 6% higher than LME, significantly below the potential 15% tariff level.

Currently, the market expects to hear clear news about copper tariffs by mid-2026