Assessing the Impact of US Tariff Expansion on Aluminium and Base Metals Markets

The U.S. expansion of 50% Section 232 tariffs on aluminum and base metals, effective August 18, 2025, has ignited a seismic shift in global industrial markets. This policy, framed as a national security measure, now applies to 407 derivative products across 22 Harmonized Tariff Schedule (HTSUS) chapters, including automotive parts, construction materials, and advanced manufacturing components. While the immediate focus has been on aluminum, the ripple effects are reshaping supply chains, investor sentiment, and the competitive dynamics of resilient metals like zinc and tin.

Geopolitical Trade Policy and Pricing Dislocations

The U.S. tariffs have created a bifurcated pricing environment. Aluminum prices in the U.S. have surged to a premium of over $900/ton above the London Metal Exchange (LME) benchmark, while European prices have fallen as trade routes shift away from U.S. customs zones. This divergence is not merely a function of tariffs but a reflection of broader geopolitical realignments. The EU and Canada have retaliated with their own tariffs on U.S. goods, including soybeans and poultry, while Brazil—a key steel exporter—has pivoted toward Asian markets.

The U.S. strategy, part of a broader "America First" trade agenda, has also spurred domestic investments in energy-efficient secondary aluminum production. Secondary production now accounts for 81% of U.S. output, with projects like Century Aluminum's Green Smelter poised to double domestic capacity while reducing carbon emissions by 75%. However, this shift has not been without consequences. The exemption of scrap metal from tariffs has incentivized recycling, but it has also created arbitrage opportunities that distort global markets.

Investor Sentiment and Market Volatility

The LME base metals index has dropped by 6% amid escalating trade tensions, with copper experiencing unprecedented pricing dislocations. The U.S. initially proposed tariffs on refined copper, triggering a record CME-LME arbitrage, but the July 30, 2025, exclusion of copper led to a rapid price collapse and a U.S. inventory glut. This volatility has forced investors to reassess exposure to the sector, favoring low-cost producers and circular economy strategies.

Zinc and tin, while less directly impacted by the tariffs, are not immune to the fallout. Zinc prices have declined by 17% since January 2025, driven by expectations of increased mine supply from projects like New Century Resources' Carpentaria and Vedanta's Gamsberg. Smelter treatment charges have rebounded to $35/ton, signaling a surplus of concentrates. In contrast, tin has outperformed, surging 25% in Q1 2025 due to supply-side disruptions in the Democratic Republic of Congo and Myanmar, coupled with historically low LME inventories.

Strategic Hedging and Entry Points in Resilient Metals

The post-tariff environment demands a nuanced approach to hedging and investment. For zinc, the current oversupply and weak demand present opportunities in exploration and mine development. Companies with access to low-cost production and strong geological potential—such as those in Indonesia or Namibia—could benefit from eventual supply-demand rebalancing.

Tin, meanwhile, offers a compelling case for strategic entry. Its supply chain is highly concentrated, with geopolitical risks (e.g., DRC's Bisie mine closure, Myanmar's Man Maw delays) creating near-term price momentum. Speculative positions in tin futures markets, combined with physical holdings, could capitalize on its volatility. Additionally, China's strategic reserves and increased refining capacity provide a buffer against international shocks, making it a stabilizing force in the tin market.

Geopolitical Risks and Legal Uncertainties

Investors must also navigate evolving geopolitical and legal landscapes. The U.S. Court for International Trade has challenged the legality of tariffs under the International Emergency Economic Powers Act (IEEPA), potentially leading to rate reductions or renegotiations. Furthermore, the Gulf's growing role in financing mineral projects—exemplified by Saudi Arabia's stake in Vale Base Metals—could reshape supply chains in politically stable regions.

Conclusion: Navigating the New Normal

The U.S. tariff expansion has created a complex, multifaceted landscape for base metals. While aluminum and copper face direct headwinds, zinc and tin offer opportunities for those who can navigate supply-side disruptions and geopolitical shifts. Hedging strategies should prioritize geographic diversification, supply chain resilience, and exposure to substitution trends. For investors with a long-term horizon, the interplay of protectionism, sustainability, and technological innovation will define the next chapter of the metals market.

In this new era of fragmented supply chains and protectionist policies, the metals sector demands agility and foresight. Those who align with the forces of circular economies, regional production hubs, and strategic resource nationalism will find themselves well-positioned to thrive.