Is the US considering lowering steel and aluminum tariffs? What does this mean for metal?

Recently, there have been rumors in the market that the United States is considering lowering tariffs on some steel and aluminum products. In response to this, Morgan Stanley stated that even if tariff adjustments do occur, their impact will be very limited. On February 14th, according to Xinhua News Agency, several American media outlets recently reported that the Trump administration is considering reducing tariffs on certain steel and aluminum products to alleviate concerns about rising prices for American consumers, paving the way for the upcoming midterm elections. According to a report from Morgan Stanley on February 14th, the policy adjustment is only targeted at the metal content in derivative products, with primary metals still facing a high tariff of 50%. The key point of this rumor is that the LME aluminum price and the Midwest premium in the US are not expected to be substantially impacted, and US aluminum producers like Alcoa will continue to be protected in the short term. The report also pointed out that in the steel industry, long steel producers (such as CMC and Gerdau NA) will be less affected than flat steel producers (such as STLD, NUE, and CLF). Importantly, this potential policy adjustment does not mean a decrease in the possibility of a 15% copper tariff. Steel and aluminum tariff policy evolution: from a 25% to 50% aggressive path The report stated that the US steel and aluminum tariff policy has undergone rapid escalation. In early 2025, the US imposed 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 tariff range to many finished products - the aluminum or steel content in these products will face a 50% tariff, while the rest of the product will be subject to the equivalent tariff rate of the originating country. It is worth noting that US companies have actively lobbied for more products to be included 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 continuously expands the list of products affected by tariffs, increasing the complexity of customs clearance and business costs. According to the report, the policy adjustment in this rumor appears to be aimed at reducing the list of products affected by tariffs, focusing on consumer affordability. However, Morgan Stanley emphasized that this does not mean a change in the tariff for primary metals - the 50% base tariff rate is expected to remain unchanged. This policy design may have unexpected consequences: imported metals facing a 50% tariff, while foreign finished products may only face lower equivalent tariffs. This tariff difference could weaken the competitiveness of manufacturing certain products domestically in the US, which goes against the original intention of trade protection. Aluminum market impact: supply and demand patterns remain largely unchanged Understanding the high dependence of the US aluminum market on imports is key to understanding the impact of this policy. About 80% of domestic aluminum demand in the US relies on imports, with 3.1 million tons of primary metals imported from January to November 2025, as well as flat sheets, foil, and other products. Morgan Stanley believes that even if tariffs on derivative products are reduced, it will not have an impact on LME aluminum prices. In fact, since the implementation of tariffs in March last year, US imports have weakened, showing some degree of destocking and demand destruction. Similarly, the US Midwest premium will not be directly impacted as the US will still heavily rely on aluminum imports. The premium has recently risen to over $1 per pound (over $2200 per ton), attempting to attract metal supply from Canada. Morgan Stanley stated that only when tariff reductions are extended to primary metals will the market face downward pressure - a scenario that currently seems unlikely. The bank also mentioned that for domestic aluminum producers like Alcoa, they will continue to be protected by tariffs in the short term. With LME aluminum prices and the Midwest premium expected to remain stable, the profitability of these companies will not be directly affected. However, if tariff adjustment policies are eventually implemented, the long-term impact on the manufacturing industry will need to be continuously monitored. In the steel industry, the market impact will show significant structural differentiation. Long steel producers like CMC and Gerdau NA are expected to be less affected as construction-related long steel products involve fewer imported derivative steel products. In contrast, flat steel producers like STLD, NUE, and CLF face greater risks. Flat steel is widely used in consumer goods manufacturing, which is the core area that this tariff adjustment may involve. However, Morgan Stanley expects steel prices to remain high with a 50% tariff. It is worth noting that Morgan Stanley stated that the situation for steel producers is more complex. While the 50% tariff provides price protection for domestic producers, the potential decrease in import tariffs for consumer goods could weaken downstream demand, a chain reaction that should be watched carefully. Copper tariff prospects: independent event or chain reaction? The report pointed out 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 gave a negative answer to this question. Morgan Stanley believes that since this measure only targets derivative products, the tariff on primary metals remains unchanged, making it irrelevant to the prospects of copper tariffs. However, the market has already priced in the possibility of lower copper tariffs. Currently, the COMEX-LME price spread is negative in near-month contracts, with the December 2027 COMEX copper price only 6% higher than LME, significantly lower than the potential 15% tariff level. Currently, the market expects clear news about copper tariffs around mid-2026. This article was translated from "Wall Street News," written by Dong Jing; GMTEight Editor: Chen Siyu.