Tariff-Driven Earnings Surge in the U.S. Materials Sector: A 2026 Outperformer Opportunity

The U.S. materials sector is poised for a transformative earnings surge in 2026, driven by a combination of structural pricing power and evolving supply-demand dynamics. Tariffs on steel and aluminum, now at 50% under Section 232 of the Trade Expansion Act, have created a protective barrier for domestic producers, insulating them from global commodity price pressures while enabling premium pricing. This policy-driven tailwind, coupled with robust demand from construction, electric vehicles (EVs), and energy transition projects, positions the sector as a compelling outperformer in 2026.

Structural Pricing Power in Metals: Tariffs as a Pricing Floor

The 50% tariffs on steel and aluminum imports, effective since June 2025, have fundamentally altered the competitive landscape. U.S. prices for these metals now exceed EU levels by 77% for steel and 139% for aluminum, creating a pricing floor that shields domestic producers from cheaper global imports. This has directly benefited companies like Nucor and Steel Dynamics, which reported record shipments in Q3 2025, with Nucor's steel shipments rising 12.4% year-over-year. The tariffs have also spurred investments in U.S. production capacity, including projects by Emirates Global Aluminum and Hyundai Steel, further reinforcing domestic supply chains.

The pricing power is not limited to raw materials. Derivative products, such as appliances and copper-intensive goods, now face higher costs due to embedded tariffs, compounding the earnings potential for upstream producers. For instance, BCG estimates that the 50% tariffs will add $50 billion in costs to U.S. industries reliant on imported metals, with construction and automotive sectors bearing the brunt. This cost inflation is being partially offset by domestic producers, who are capturing higher margins. A December 2025 poll of steel industry professionals revealed 54% anticipate moderate price gains of $931–$1,100 per ton by Q2 2026, underscoring confidence in the durability of the tariff regime.

Supply-Demand Dynamics: Construction and EVs as Growth Catalysts

The construction sector is a critical demand driver, with tariffs exacerbating material price spikes. Effective import tariffs on construction goods reached a 40-year high of 25%–30% in 2025, leading to a 4.2% year-over-year increase in material prices. While this has squeezed project margins and contributed to an 88.2% rise in project abandonment activity by August 2025, it has also spurred innovation in procurement strategies. Firms are adopting digital tools to integrate tariff data and freight information, while others are stockpiling materials or substituting inputs to mitigate risks.

Electric vehicles and energy infrastructure are another growth engine. Federal incentives for semiconductor production and clean energy are driving demand for materials like copper, which faces a structural deficit starting in 2025. BloombergNEF projects a 19 million metric ton shortfall by 2050, driven by EVs, energy storage, and data centers. U.S. producers are capitalizing on this imbalance, with tariffs ensuring they command higher prices for copper and aluminum. For example, Packaging Corporation of America has expanded its containerboard production capacity, leveraging tariffs to justify price increases despite weak non-food demand.

Packaging Sector: Navigating Mixed Demand and Cost Pressures

The packaging industry faces a more nuanced outlook. While food brands are driving demand through price promotions and e-commerce growth, non-food sectors remain weak. Smurfit WestRock and Amcor are mitigating this by deepening partnerships with clients like General Mills and PepsiCo, securing volume growth and operational synergies. However, the sector is also grappling with inventory challenges and margin compression. Q3 2025 data shows a 2.1% decline in corrugated shipments, with PCA reporting 417,000 tons of inventory in its legacy system.

Cost-cutting measures are critical for survival. Greif accelerated a $120 million cost savings plan in Q3 2025, including workforce reductions, while PCA's acquisition of Greif's containerboard business aims to consolidate market share. Despite these efforts, the sector's growth is capped by weak industrial demand and persistent supply chain disruptions.

Risks and Mitigation Strategies

While the tariff-driven tailwind is robust, risks persist. The BCG analysis warns that tariffs could reduce U.S. GDP by 0.5–0.7% and raise consumer prices. Additionally, 35% of steel industry professionals remain skeptical about the sustainability of current price gains, citing potential policy reversals or demand softening. To mitigate these risks, companies are diversifying supply chains, investing in automation, and prioritizing high-margin products. For instance, Americas Gold and Silver is advancing antimony production initiatives, creating a new revenue stream by 2026.

Conclusion: A 2026 Outperformer Case

The U.S. materials sector's 2026 earnings growth-projected at 20%, the highest in five years-is underpinned by tariffs, structural demand shifts, and operational resilience. Metals producers, particularly those with exposure to construction and EVs, are best positioned to capitalize on pricing power, while packaging firms must navigate mixed demand through cost discipline and strategic partnerships. Investors should prioritize companies with strong balance sheets, diversified product portfolios, and proximity to energy transition megatrends.