It is no surprise that as a trade war begins to brew, steel - the backbone of manufacturing - once again finds itself in the spotlight. In many parts of the world, steel demand and output are both fluctuating. Now, with a new set of proposed tariffs from the US, the industry may be in the beginning of a serious recalibration. 

US' international protectionism

Yesterday, president Trump announced the next in a series of potential tariffs – 25% on all steel imports. Trump's idea is similar to a policy he adopted in 2018, in which steel was tariffed at the same rate while aluminium was tariffed at 10%. 

At the time, Commerce Secretary Wilbur Ross concluded that metal imports threatened national security. 

"The announcements were awash in contradictions," The Peterson Institute for International Economics said back then. "Although they were motivated by combatting China, they were imposed on NATO and other alliance members, because the United States had largely stopped importing steel and aluminium from China, as a result of antidumping and countervailing duties imposed by earlier US administrations."

Today's tariffs come with similar concerns on both sides. It is expected that domestic steel producers, like US steel (which produced 15.75 million metric tons in 2023 according to World Steel) will see short-term benefits, but the cost to manufacturers reliant on imported steel may paint an overall gloomier picture.

An interesting thing to note is that the 'opportunity' created for steel by an increasingly protectionist US may not be as domestic as it seems. 

Nippon Steel, Japan's largest steelmaker and the fourth-largest globally (43.66 million metric tons), has been trying to acquire US Steel for US$14.9 billion. The deal was blocked by ex-president Joe Biden in January, but the company is still in pursuit. 

Japan's chief cabinet secretary Yoshimasa Hayashi told media: "We are aware that Nippon Steel is not looking at this as a mere acquisition, but is considering a bold proposal that is completely different from anything it has done in the past."

On Friday, Trump said that Nippon Steel "is going to be doing something very exciting about US Steel [...] They'll be looking at an investment rather than a purchase."

The deal would boost the US' domestic capacity, but signals that Trump's move is less protectionist than it seems on the outset.

Europe's slow decline 

Across the Atlantic, the EU's steel sector continues its multi-year downturn. 

Published earlier this week, the European steel association, Eurofer's economic and steel market outlook found that EU steel consumption fell 6% in 2023, marking the fourth recession in five years, and is projected to decline another 2.3% in 2024 before a modest recovery in 2025. 

Even with a 2.5% production rebound last year, total output remains well below pre-pandemic levels, with capacity utilisation in leading producers—Germany, Italy, Spain, and France—hovering under 75%.

A challenge facing European steelmakers is the Carbon Border Adjustment Mechanism (CBAM). CBAM was initially intended to create fairer competition by imposing carbon costs on imports, but Eurofer said that improper implementation could risk European competitiveness. 

"European steelmakers have been subject to the EU Emissions Trading System (ETS) since its inception in 2005, thus being exposed to a unilateral carbon price that has recently reached around 75€/t CO₂," Eurofer wrote in a separate press release, calling for CBAM to be 'fixed' 

"Meanwhile, more than 25 Mt of steel (around 20% of EU production) are imported annually from third countries without any carbon cost. Therefore, the planned launch of the Carbon Border Adjustment Mechanism (CBAM) in 2026 is urgently needed [...] However, the CBAM is an unprecedented, first-of-its-kind measure that entails significant risks, in particular for a complex sector like steel."

ArcelorMittal, Europe's largest steel producer and second-largest globally (68.52 million metric tons), recently sold off Kazakh assets and is shutting down long steel operations in South Africa, citing weak demand and infrastructure woes.

"Brussels is now facing a very significant challenge: whether to turn its economic policy towards the traditional industrial direction with the support of new technologies (which is what Trump is doing now), or to live in the past and do nothing, watching production facilities close and relocate to other countries," said Stanislav Zinchenko, chief executive of GMK Center, in an analysis of the report. 

China's changing outlook

For years, China has led the world's steel production. But the country is now undergoing a profound shift in demand. 

China Baowu Steel Group (130.77 million metric tons) has begun to pivot towards clean energy and infrastructure, moving away from traditional property construction. This has softened demand for iron ore in the country, sending prices to around US$100 per ton—down sharply from the highs of recent years.

Speaking to Mining Magazine, an insider said that while Chinese demand may be waning, it is "still positive for the time being."

Winners and losers in the new steel order 

Steel is not only crucial for construction and manufacturing but also for producing heavy machinery, including mining equipment. 

OEMs rely on steel for their equipment, and the US tariffs could seriously raise costs. While most OEMs have US-based production facilities, a tariff on imported steel could exert pressure regardless. 

While China Baowu and ArcelorMittal continue to dominate production, steelmakers in other regions are navigating significant hurdles.

India's Tata Steel (29.50 million metric tons) faces rising protectionism in Europe, where it has key operations.

South Korea's POSCO (38.44 million metric tons) could see reduced exports to the US as trade barriers increase.

China's Ansteel Group (55.89 million metric tons) remains a major supplier to shipbuilding and rail industries, but new environmental regulations could limit its expansion.

Trump's tariffs have sent many industries for a spin, but in the case of steel, a lot has been lurking under the surface. Steel prices have been volatile for many years and this trend looks due to continue. With no clear end to trade tensions in sight, the coming years will test the resilience of the global steel supply chain. Whether through consolidation, trade agreements, or technology, the industry is set for a defining period.