Aluminum stocks are in focus this morning after President Donald Trump announced plans to raise tariffs on aluminum imports from 25% to 50%, citing a need to protect American producers from global competition, especially from China.
Trump’s increase in aluminum tariffs is already drawing concerns from industry leaders who worry it may backfire.
Jean-Marc Germain, CEO of the European aluminum giant Constellium SE (NYSE: CSTM), for example, warned in a CNBC interview today that such a steep increase could harm demand and strain international trade relationships.
Why Germain disagrees with Trump on 50% aluminum tariffs
According to Jean-Marc Germain, the original 25% tariff had a largely positive impact on the domestic aluminum industry as it leveled the playing field against unfairly priced imports.
“Initially, the 25% tariff… was good for the aluminum industry,” he told CNBC, adding “it created a level playing field with China.”
However, he cautioned that doubling the rate to 50% could go too far. “Too much of a good thing becomes a bad thing, and that’s what I think we can be faced with.”
Germain sees the risks of raised aluminum tariffs as twofold: a drop in demand due to rising product costs, and potential trade friction with key partners.
“Products become really expensive,” he noted, which could lead customers to seek cheaper alternatives or reduce order volumes.
Additionally, a significant portion of Constellium’s raw aluminum supply comes from Canada – a country that may find other markets more attractive if hit with steep U.S. tariffs, Germain cautioned.
How is Constellium relatively better positioned for Trump tariffs?
Despite the challenges, Germain emphasized that Constellium is competitively positioned to weather the announced increase in aluminum tariffs to 50%.
“We have always been local for local,” he explained. The company has major operations in both the U.S. and Europe, allowing it to serve each market from within, rather than relying heavily on cross-border flows.
Because Constellium’s aluminum fabrication and sales operations are already embedded within the U.S. and European economies, it faces limited direct exposure to transatlantic tariffs.
“The flows between continents or countries, in our case, is quite limited,” Germain said.
But even with this relative insulation, he warned that tariffs could still lead to broader price inflation in the market, putting pressure on customers and potentially slowing demand.
Why targeted aluminum tariffs on China won’t work
According to Germain, opting for targeted tariffs on Chinese imports wouldn’t be preferable either, as “you open the door to circumvention … metal will find its way through other routes.”
Past efforts to restrict Chinese aluminum have often led to the material being rerouted through intermediary countries like Vietnam or Mexico to avoid direct tariffs.
While Germain sees merit in using trade policy to counteract unfair practices, he suggested that overly blunt instruments or dramatic hikes could undermine the original goal.
All in all, while trade protections can support domestic manufacturing, Constellium’s CEO believes balance is key.
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