North American aluminum sector blindsided by tariff volatility, trade flow uncertainty

US trade policy is beginning to reroute essential Canadian primary aluminum exports to Europe and other regions as producers seek to avoid high tariffs.

The North American aluminum sector has experienced unprecedented pricing volatility and trade flow uncertainty amid a historically disruptive US trade policy rollout, experts and market participants told Platts, part of S&P Global Commodity Insights.

Trump's rapid series of tariff actions to start his second term has shocked trading partners and left metals markets struggling to keep up with an ever-changing international trade landscape. His June 3 order to raise duties on all aluminum and steel imports to 50% led to warnings from both the US and Canadian aluminum sectors that the move may significantly damage the tightly integrated North American aluminum supply chain. The US aluminum manufacturing industry relies on Canadian aluminum imports to feed its furnaces, but 50% duties may force Canada to export its supply elsewhere.

"While Canada remains committed to serving its US customers, the industry may be forced to diversify trade toward the European Union," said Jean Simard, president and CEO of the Aluminium Association of Canada, in a June 4 statement.

About two-thirds of primary aluminum consumed in the US comes from Canada, according to the Aluminum Association, a US-based trade group.

"A 50% tariff on Canadian aluminium will suppress demand across the continent — whether the metal is produced in Canada or the US," said Jean Simard, president and CEO of the Aluminium Association of Canada, in a June 4 statement. "It will impact workers on both sides of the border and disrupt key sectors including defense, construction and automotive."

The Aluminium Association of Canada, whose members include aluminum giants Rio Tinto and Alcoa, said the 50% tariff makes Canadian exports to the US "economically unviable."

"This measure risks increasing US reliance on aluminium from distant sources — including China, Russia, India and the Middle East — for a material critical to national security," Simard added. "It jeopardizes 125 years of cross-border industrial cooperation and will trigger a fundamental shift in global trade flows."

Alcoa said on June 17 it has already begun redirecting some of its Canadian exports away from US customers to avoid tariff costs.

Canada produces low-carbon primary aluminum due to its heavy use of hydropower energy. The product is attractive to European markets, which value low-emissions metals and have the CBAM policy looming.

"Ultimately, this [50% US tariff] looks unsustainable and rather an upping of the ante in trade talks," Karen Norton, principal aluminum analyst for Commodity Insights said. "We believe Canadian metal, which would normally head to the US in huge volumes, would not struggle to find a new home."

Trade chaos

Trump's trade policy rollout in the first half of 2025 has been historically disruptive, according to experts.

"This period since inauguration day 2025 has been the most disruptive period in international trade history since the Second World War," Raj Bhala, an international trade lawyer and professor at the University of Kansas, told Platts. "We've had 30 years of North American Free Trade commitments, some of which in the first Trump administration had been renegotiated into the USMCA, blown up. It's also been the most accelerated. We've never seen announcements like this at such a blistering pace."

The volatile trade policy approach is beginning to erode US credibility in the international trade space.

"Beyond hurting US manufacturing, it is really destroying trust in the US as a trade partner," Orit Frenkel, CEO of the American Leadership Initiative, a non-partisan think tank, told Platts. "That, to me, is the major damage. Tariffs have gone up at an incredible pace, and we are treating our allies very badly. So, there's a lack of trust, which I think is going to take a long time to repair."

In addition to Canada looking at redirecting more aluminum exports to Europe, the EU has aggressively pursued a pending free-trade agreement with India to mitigate the impact of US tariffs.

"Trade is happening with or without the US," said Dr. Frenkel. "What is happening is that we're just left out. And that's really to our major detriment."

Industry waiting for stability

Meanwhile, the manufacturing and aluminum sectors in the US are frozen in place as they await a clearer outlook on government policy.

"The short-term reaction we're seeing is that people are just waiting for the dust to settle," William Reinsch, Scholl Chair in international business at the DC-based Center for Strategic and International Studies, told Platts. "You can't make any kind of long-term commitment or planning when you don't know what the economics are going to be next week, much less 6 months from now or 2 years from now."

Canadian Prime Minister Mark Carney said on June 16 that the US and Canada will aim to negotiate a trade deal within 30 days after meeting Trump at the G7 summit, setting the stage for yet another change in the tariff landscape.

Most of the US aluminum sector has said the industry needs consistent, predictable trade policy to support investments.

"People who are contemplating building something new, the first thing they do is sit on their money and wait to see what happens, which is ironic because Trump's alleged goal is to force more manufacturing back into the United States," added Reinsch. "The way he's rolled these things out, it deters that additional investment."

At a recent industry event, North American aluminum market players told Platts they were skeptical that Emirates Global Aluminum's recently announced $4 billion investment in a primary aluminum smelter in Oklahoma would come to fruition given the current environment.

At the same event, multiple consumer sources said they were expecting aluminum demand destruction in the US across several sectors amid tariffs.

"People will move away from aluminum is my biggest concern," a consumer source told Platts. "The higher the premium, it erodes our downstream market...It will hit a point where it will affect demand."

The Platts spot 99.7% P1020 US Aluminum Transaction Premium, also known as the Midwest Premium, has seen unprecedented volatility following Trump's 50% tariff announcement.

The price assessment hit a record high of 68 cents/lb on June 6 before plummeting 15.5% by June 13 ahead of the G7 summit this week. Canadian Prime Minister Mark Carney said on June 16 that the US and Canada will aim to negotiate a trade deal within 30 days.

"It really is a yo-yo policy," said Reinscher. "They're just all over the map."

The Platts spot 99.7% P1020 US Aluminum Transaction Premium was assessed at 55.05 cents/lb plus LME cash, delivered Midwest, net-30-day payment terms, on June 16.