New Tariff Proposals as Part of Reshoring Strategy

The United States is preparing to increase or introduce new tariffs on key metals such as steel, aluminum, and copper as part of a broader strategy to strengthen national security and incentivize reshoring of critical industries. According to a report from the Washington Post, strategists advising President-elect Donald Trump are suggesting a shift from the universal tariffs initially campaigned on, towards more targeted tariffs aimed at specific sectors. The goal is to bring critical manufacturing and defense supply chains back to the U.S., with metals such as steel, iron, aluminum, and copper being major targets for these tariffs.

Focus on Key Sectors: National Security and Critical Materials

The metals targeted by these potential tariffs are essential to the defense industry and broader manufacturing needs. Steel, aluminum, and copper are crucial to the production of weapons, defense infrastructure, and other critical goods. Tariffs on these materials would support the reshoring initiative by encouraging more domestic production of these materials. Additionally, materials like batteries, rare earth minerals, and solar panels are also likely to be included in tariff discussions due to their importance to clean energy efforts and technological advancements, which the U.S. seeks to ramp up.

Impact on U.S. Scrap Exports and Domestic Recycling Market

The U.S. has long been a major exporter of both ferrous and nonferrous scrap metals, with its recycling facilities unable to absorb the volume of scrap generated domestically. In 2024, the U.S. exported substantial amounts of aluminum scrap (581,000 metric tons) and copper scrap (620,000 metric tons) in addition to 2.2 million metric tons of steel scrap, primarily to Turkey. If tariffs succeed in keeping more scrap metal within the U.S., it could provide a boost to domestic recycling and steel production. However, the impact on U.S. recycling remains uncertain as the country’s metal melting capacity is limited. The increased tariffs might lead to more scrap being consumed locally, provided the necessary investments in infrastructure for recycling and production are made.

Challenges for U.S. Recycling Industry and Domestic Production

While tariffs may encourage more scrap to stay in the U.S., the primary concern is whether the country’s recycling infrastructure will be able to absorb the increased volume of materials. Historically, U.S. melting capacity has been limited, particularly for recycled steel and nonferrous metals, which has led to the large-scale export of scrap. The effectiveness of tariffs in stimulating domestic consumption of scrap depends on whether they will encourage new investments in recycled-content steel, aluminum, and copper production. If these investments result in new production capacity rather than simply replacing existing capacity, the U.S. may see increased domestic consumption of scrap. However, without corresponding growth in infrastructure, the increase in tariffs may only marginally affect the overall recycling market.