What impact will the US China tariff war have on the aluminum industry

The US-China tariff war can have a significant impact on the aluminum industry, as both countries are major players in the global supply chain. 

1. China's direct exports to the US have dropped sharply
The US has imposed a 25% tariff on Chinese aluminum products (the combined tax rate after adding the previous anti-dumping tax is 25%-179.9%), causing China's direct exports to the US to drop from a high proportion before the trade war in 2018 to only 7.96% in 2024. China's aluminum exports have shifted to re-export trade channels such as Mexico and Canada, but the new US tariff policy includes re-export trade in the scope of taxation, further blocking this path.

2. The gap in the U.S. supply chain is widening.

The annual production of electrolytic aluminum in the United States is only 1.1 million tons, and the annual demand exceeds 5 million tons. It is heavily dependent on imports (about 54% comes from Canada). The tariff policy has hindered the flow of trade in the North American Free Trade Area. In the short term, it will be difficult for emerging markets such as the Middle East and India to fill the supply gap, pushing up the aluminum premium in the Midwest of the United States to a historical high (reaching 33 cents/pound in 2025)

3.Reconstruction of regional supply chain
Rise of Southeast Asia and emerging markets: Chinese companies are accelerating the transfer of production capacity to Vietnam, Thailand and other places, building a "Chinese raw materials + Southeast Asian processing" model to circumvent tariffs. In 2024, China's aluminum exports to the "Belt and Road" countries will increase by 16.2% year-on-year, and the Middle East and Southeast Asia will become new growth points.
Canada and Mexico are hit: Canadian aluminum may reduce production by 30% due to tariffs, and Mexico's processing trade model is facing collapse, forcing companies to turn to Brazil or localize production.

4.Competition for high value-added products intensifies
China has cancelled the export tax rebate for aluminum (starting from December 2024), forcing companies to turn to high value-added products (such as 7055 aluminum alloy for aviation). At the same time, the downstream manufacturing industry in the United States (automobiles, aerospace) has accelerated material substitution (such as magnesium alloys and plastics) due to rising costs.

5. Domestic contradictions in the United States are highlighted
Short-term protection and long-term disadvantages: The cost of electrolytic aluminum in the United States (US$2,800/ton) is 30%-40% higher than that in Canada and the Middle East, and tariff protection is difficult to sustain. The surge in downstream manufacturing costs (such as an 8%-12% increase in automobile manufacturing costs) may cause 230,000 job losses.
Inflation pressure: The Peterson Institute predicts that a 25% tariff will push up the US inflation rate by 0.6% and slow GDP growth by 0.3% in 2025.

6. China's production capacity advantages and challenges coexist
- China accounts for 60% of global aluminum production, but 70% of bauxite is imported. The tariff war accelerates China's integration of the RCEP regional supply chain, and alumina production capacity continues to expand (an additional 12 million tons in 2025.
- In the short term, Shanghai aluminum prices are under pressure (global surplus of 620,000 tons), but new energy demand (such as photovoltaics and ultra-high voltage) supports the medium- and long-term fundamentals.

7. Geopolitics and multilateral rules conflict
The United States tried to reconstruct the "friendly shore outsourcing" system through tariffs, but WTO rules and allies' countermeasures (such as Canada and the European Union) exacerbated the fragmentation of global trade. China reduced its dependence through strategies such as BRICS local currency settlement (accounting for 25%).

The Sino-US tariff war has pushed the global aluminum supply chain from "efficiency first" to "safety first", causing price fluctuations and regional substitution in the short term, and may accelerate the formation of a "multi-center" trade pattern in the long term. China still occupies a core position with its production capacity and technological advantages, but needs to cope with challenges such as environmental regulations (such as carbon emissions) and competition in emerging markets.

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