The proposed 25% tariffs on all steel and aluminum imports appear to place offshore wind and onshore oil and gas among the most risk-exposed sectors in the energy landscape, with steel contributing a high proportion of the total cost.

President Donald Trump’s new 25% tariffs on steel and aluminum imports are set to drive up procurement costs in the US, with the country likely needing significant investment over the course of several decades to achieve full self-sufficiency in meeting domestic steel demand.  Unless exemptions to the proposed tariffs can be agreed, steel and aluminum prices could soar beyond what was seen in 2018, when Trump imposed similar tariffs in his first term in office, despite the current backdrop of weaker demand. 

‘No exemptions, no exceptions’

The potential economic impact of these tariffs could be severe for both the US and its trading partners. The US is the world's largest importer of steel, counting Canada, Brazil and Mexico as its top three suppliers. Canadian steel and aluminum in particular play a critical role in supporting various US industries, including the defense, shipbuilding, energy and automotive sectors. While US total steel demand represents approximately 5% of the global total, the proportion of steel used for energy applications is substantially higher at close to 15%, with concern growing among procurement groups in energy sectors around the impact on cost and delivery following the most recent policy announcements.

Current price picture

What we observe in the market is that US spot prices are reviving, suggesting concerns over import costs in the coming months. Despite falling in the last two years, domestic prices have remained relatively uncompetitive, and the domestic premium has been comparatively constant. From the Canadian perspective, the proposed 25% tariffs on all steel and aluminum imports have raised significant concerns across the country’s steel sector, already creating considerable economic uncertainty. Canadian supply is around 10% cheaper, for example, but if given a duty of 25%, there would not have been even a month in the past three years where it would have been cheaper than US-made steel.

Impact across segments

Offshore wind and onshore oil and gas appear as the most risk-exposed sectors within the energy landscape, with steel contributing to a high proportion of the total cost, either via steel plates for turbines and monopile foundations or through linepipe, plates, coils and bars for onshore oil and gas facilities. US shale and offshore oil and gas projects are most likely to see cost rises in the region of 5% to 10%, along with onshore wind, while thermal power and solar projects may be less affected by the resultant inflationary pressures.

Learn more about our data and insights for the steel industry.