The Onset of 25% Tariffs: A Significant Blow to the US Steel Market
In an unprecedented move, the US government has officially implemented a 25% import tariff on steel imports from Canada and Mexico. As of March 4, 2025, these tariffs will dramatically reshape the landscape for US steel buyers and suppliers. This measure marks a significant escalation in the trade conflict between the US and its neighboring countries, which have been critical sources of steel for the American market.
Both Canada and Mexico are vital trade partners to the US steel industry. In 2024, Canada was the largest exporter of steel to the US, with Mexico ranking third. Their importance in the US steel market cannot be overstated, as their combined share of total steel imports into the US represents a substantial portion of the steel supply, particularly for critical products used in manufacturing and construction.
The introduction of the 25% tariff has been a key element of President Donald Trump’s trade policy, which began during his first term in office. Following months of negotiation and delay, the tariffs were initially scheduled for February 4, 2025, but were postponed due to last-minute border concessions from both Canada and Mexico. With the tariffs now fully implemented, the market is bracing for significant changes in pricing, supply, and competition.
Steel Imports from Canada and Mexico: What’s at Stake?
According to data from the American Iron and Steel Institute, steel imports account for 23% of finished steel consumption in the US. Of these imports, Canada and Mexico are responsible for a combined 8.6% of the total, with Canada accounting for 6.3% alone in 2024. This means that Canada and Mexico together represented a substantial portion of the steel supply to the US, with Canada being the largest supplier of steel to the country.
In 2024, Canada exported approximately 6 million metric tons of steel to the US, which accounted for about 23% of the total US steel imports. The products Canada exports to the US are crucial across several industries, including automotive, construction, and manufacturing. The steel types most heavily imported from Canada include:
• Hot dipped galvanized sheet
• Cold rolled sheet
• Hot rolled sheet
• Continuous mill plate
• Wire rod
For instance, in 2024, Canada exported 927,000 metric tons of hot dipped galvanized sheet and 550,000 metric tons of cold rolled sheet, representing about 34% and 38% of total US imports of these products. In addition, 910,000 metric tons of hot rolled sheet and 604,000 metric tons of continuous mill plate were imported from Canada, making up a significant portion of US imports of these types of steel.
Furthermore, wire rod imports from Canada in 2024 amounted to 450,000 metric tons, representing 46% of the total US wire rod imports. The US’s production of wire rod has seen a significant decline following the idling of Liberty Steel’s wire rod production in South Carolina and Illinois in 2024, making the imports from Canada even more critical. These figures illustrate the magnitude of the disruption that will occur as these imports are now subject to a 25% tariff.
How the Tariffs Will Affect Steel Prices and Supply
The tariffs are expected to cause immediate price hikes in the US steel market. According to MEPS International, a global steel price reporting agency, prices for hot rolled coil, plate, and wire rod in the US have already seen substantial increases since January 2025. Notably:
• Nucor, one of the largest US steel producers, raised plate prices by USD 260 per short ton, hot rolled coil prices by USD 110 per short ton, and wire rod prices by USD 100 per short ton.
• In February 2025, MEPS International reported price increases of 15.4% for hot rolled coil, 12.5% for plate, and 11.5% for wire rod.
This price inflation is expected to continue as the 25% tariff on steel imports starts taking its toll. Increases in prices for key steel products will significantly impact US steel buyers, especially in industries reliant on imports, such as automotive manufacturing and construction. The disruptions could lead to higher production costs and increased consumer prices, especially as US domestic steel prices rise.
In addition to price increases, the supply of steel products such as hot rolled sheet, plate, and wire rod could be disrupted. Despite the US’s increased domestic steel production capacity, it is unlikely that the current capacity will be enough to absorb the shock of losing a significant portion of the Canadian supply. For example, the 910,000 metric tons of hot rolled sheet and 604,000 metric tons of continuous mill plate imported from Canada will leave a supply gap that could take months or even years to address, especially for the wire rod sector, where the US has already seen production decline.
Mexican Steel Imports: The Other Side of the Tariff Equation
While Canada is the largest steel exporter to the US, Mexico plays a crucial role, particularly in the slab steel market. Slab steel accounts for a significant portion of US imports, and in 2024, over 1 million metric tons of slab steel were imported from Mexico. Slab steel is a key raw material in the production of finished steel products like plate and coil. While this represents only one-fifth of the total US slab steel imports, it still constitutes a major portion of the US steel supply.
While the immediate impact of the tariffs on slab steel might be less dramatic than on products like hot rolled sheet or wire rod, disruptions to slab supply could still ripple through the steel production chain, resulting in delays or price hikes for US manufacturers.
Stainless Steel: A Product Less Affected by Tariffs
One area that may escape the brunt of these tariffs is stainless steel. Despite Canada being a major exporter of nickel, which is a key component in stainless steel production, the tariffs are expected to have minimal impact on this particular steel product. In 2024, Canada and Mexico combined accounted for only 7.7% of US stainless steel imports. This indicates that stainless steel is less reliant on these two countries, and US production of stainless steel primarily relies on stainless scrap.
While stainless steel prices could still experience fluctuations due to global supply chain issues and steel price increases, the 25% import tariff will have limited impact on the stainless steel sector in the US.
The Road Ahead: Additional Tariffs and Reciprocal Measures
Looking ahead, the US steel market may face even more challenges. The Section 232 tariffs, which were originally imposed in 2018 on steel and aluminum imports, are set to be reinstated on March 12, 2025. These tariffs, imposing a 25% duty on steel and aluminum from all countries, will eliminate the exemptions and exclusions that have been in place since the tariffs were first introduced. If enacted, these tariffs would further restrict steel imports into the US, exacerbating the supply crisis and pushing steel prices even higher.
Additionally, Canada and Mexico have already announced plans to impose reciprocal tariffs on US steel exports. These tariffs are expected to take effect on April 2, 2025, and could further drive up costs for US steel producers. With the potential for all tariffs to be cumulative, steel buyers and manufacturers across the US are bracing for a costlier and more challenging future.
Key Takeaways:
• US Steel Market Disruption: 25% import tariffs on steel imports from Canada and Mexico are expected to drive price increases and disrupt supply chains.
• Canada’s Role: Canada is the largest exporter of steel to the US, with 6 million metric tons of steel exported in 2024, making up 23% of US steel imports.
• Impact on Steel Prices: Steel products such as hot rolled coil, plate, and wire rod have seen significant price increases, with further rises expected.
• Slab Steel from Mexico: Mexico contributes over 1 million metric tons of slab steel to the US, which could be impacted by the tariffs.
• Stainless Steel Exemption: Stainless steel imports from Canada and Mexico account for only 7.7% of US imports, meaning this sector will face minimal impact.
• Section 232 Tariffs: A 25% duty on steel and aluminum imports from all countries is set to be reinstated on March 12, 2025, further exacerbating supply shortages and price hikes.
• Reciprocal Tariffs: Canada and Mexico will implement reciprocal tariffs on US steel beginning April 2, 2025, leading to higher costs for US steel producers.
