- The Trump administration intends to slap new tariffs on US steel and aluminum imports
- The Commonwealth Bank says global steel and aluminium markets should be able to cope with less US demand
- It says the true threat will be if they start a global trade war
In isolation, tariffs on US steel ad aluminum imports are unlikely to have much impact on global markets.
That’s the view of Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, who has been running his ruler over what impact they will have on global steel and aluminium markets.
He thinks both markets will be able to cope without too much trouble.
“On steel markets, the measures are expected to help boost US domestic steel output by 8.7 million tonnes (Mt) and push capacity utilisation to around 80%,” he says.
“That will mean that around 0.5% of global steel production will have to be displaced by higher cost US output.
“Global steel markets should comfortably absorb this impact.”
Dhar shares a similar view when it comes to aluminium markets.
“[The] US is hoping to add 670,000 tones of aluminium domestically to boost US capacity utilisation to around 80%,” he says.
“That suggests that around 1% of global aluminium production will be displaced by stronger US aluminium output.
“While the market impact will be more pronounced in aluminium than steel, we expect aluminium markets will be able to absorb the impact quite comfortably.”
So what’s will be potentially displaced by stronger US output will likely to be absorbed fairly easily into other markets in his opinion.
However, that’s not what Dhar and markets are worrying about at present.
“The larger threat is the potential for escalating trade tensions as a result of these tariffs. A trend towards global protectionism could derail global trade and the forecast for synchronised economic growth this year,” he says.