President Donald Trump’s steep tariffs on imported steel and aluminum could boost domestic producers, even as they face the possible repeal of $6 billion in climate grants.
The 25 percent tariffs — set to go into effect March 12 — will apply to all countries. That’s a win for the U.S. steel industry, which has long complained about cheap imports — and urged Trump to resurrect the tariffs he implemented in his first term.
“We love it,” Philip Bell, president of the Steel Manufacturers Association, said in an interview. “Over the first set of Trump tariffs, there was about $20 billion of investment announced to modernize and decarbonize and electrify our steel industry.”
The tariffs are vexing U.S. allies like Canada, the biggest exporter of steel and aluminum into the U.S. market. Some experts say they could also raise prices for American consumers on various products; the U.S. International Trade Commission found that the last time Trump implemented steel and aluminum tariffs, prices for those products rose but did not meaningfully increase inflation.
Trump’s tariffs are also putting a new spotlight on roughly $6 billion in grants — passed in the 2022 Inflation Reduction Act — for steel, aluminum and other industrial sector decarbonization. The Trump administration froze all funds from the Inflation Reduction Act and bipartisan infrastructure law last month — and has been slow to restore the funds, despite several court orders to do so.
Even if Trump complies with the federal court orders, industrial grants could get the ax as Republicans eye eliminating climate funding. Project 2025, the Heritage Foundation-led blueprint for the Trump administration, also calls for the elimination of the Department of Energy’s Office of Clean Energy Demonstrations, which administers the grants.
While Bell said the tariffs could free up private capital for green upgrades, clean energy advocates say the money is still necessary to make sure the U.S. cuts planet-warming emissions and competes globally in the future.
“A forward-looking company would absolutely view the tariffs as an opportunity to accelerate decarbonization, but I’m skeptical most will,” said Evan Gillespie, a partner at Industrious Labs. “Companies in the U.S. could use the tariffs to raise prices themselves, pocket the profit and carry on with the same polluting facilities.”
The environmental group RMI recently sounded alarms about plans to refurbish dirty blast furnaces at U.S. plants. Gillespie also said policies under Trump are “mercurial.” Earlier this month, Trump announced sweeping tariffs on imports from Canada and Mexico, only to delay them by a month (he followed through with a new 10 percent tariff on imports from China).
“Is a company going to make long-term decisions based on the president’s actions one day when everything could swing the next?” he said.
Supporters say the grants will deliver long-term breakthroughs in the aluminum and steel industries, as new climate policies are implemented globally. The European Union’s cross-border adjustment mechanism, for example, will impose penalties on high-emissions imports in the EU.
But one major company has already bowed out of plans to produce cleaner steel. Last month, the Swedish steelmaker SSAB withdrew from a $500 million grant to produce steel with electricity and hydrogen energy. It would have been the greenest steel produced in the U.S.
Cleveland-Cliffs, another awardee in the industrial grant program, also indicated last year it may decline the money, only to later say it was still interested. The grants require at least 50 percent matching.
The aluminum awards to companies like Constellium and Century Aluminum include recycling and electrification projects. With the withdrawal of the SSAB hydrogen project, the steel awards are largely for new electricity-driven production to replace the traditional coal-based blast furnaces.
Cleveland-Cliffs and other awardees in the program did not respond for comment. Many clean energy grant recipients are quietly hoping the spending resumes while avoiding a clash with the administration. A DOE spokesperson also did not respond for comment.
Experts say the grants are critical for revitalizing an American aluminum industry that has been decimated over the past quarter century by imports from China, Canada and elsewhere. Four aluminum smelters currently operate in the U.S., down from 23 at the beginning of the century, according to Joe Quinn, executive director of the Center for Strategic Industrial Materials at the think tank SAFE.
“The scale of the problem is beyond the commercial ability to pay for it. There has to be government support,” Quinn said.
One grant to Century Aluminum is for the first new aluminum smelter in the U.S. in nearly 50 years. If the grants resume and tariffs stick, Quinn said the biggest challenge to aluminum production in the U.S. is securing the energy necessary to power smelters and other facilities.
“Limiting imports to increase margins for domestic primary producers can be part of the solution,” he said. “But the availability and affordability of energy is still the fundamental problem.”
Some analysts say the tariffs will ratchet up the price of energy by making it more expensive to build infrastructure like natural gas pipelines and wind turbines. Market analysts predict big demand spikes in the coming years driven by more domestic electrification, artificial intelligence, and other purposes. The price of electricity has jumped in recent years.
All told, U.S. steel manufacturing produces roughly 1 percent of U.S. emissions. Globally, the iron and steel industry produces about 7 percent of emissions — a modest but necessary area of decarbonization to prevent extreme temperature rise, according to climate scientists and energy experts. Steel is considered a hard-to-abate sector because it’s energy-intensive and requires high temperatures necessary for smelting and other processes. Aluminum is also a big emitter.
Steel demand is growing worldwide as nations implement climate plans. It’s critical for the build-out of renewable energy systems, electric transmission infrastructure, electric vehicles and a laundry list of other energy systems.
U.S. companies like General Motors and Ford have lined up supply deals for lower-emissions steel, and European firms have struck contracts for shipments with virtually no emissions tied to it.
The auto sector is largely viewed as the biggest driver of low-emissions steel demand. Volvo announced new plans in late January.
Clean energy supporters say hydrogen, which is not a greenhouse gas, is the best option for truly low-emissions steel. Some analysis suggests China is on track to produce serious amounts of steel with hydrogen by next decade.
But industry representatives in the U.S. are skeptical of hydrogen energy.
“A lot of folks really refer to it as hydrogen hype,” said Bell. “It’s still too costly to make steel with hydrogen.”
Today, hydrogen in the U.S. is produced almost exclusively using coal and natural gas. It’s used for refining petroleum, producing fertilizers like ammonia and other purposes.
Bell and other industry representatives say the U.S. already produces some of the cleanest steel globally.
That’s largely because the U.S., a highly industrialized country, reproduces a lot of scrap steel with furnaces powered by electricity. Those furnaces emit less pollutants than the dirtier blast furnaces — up to 75 percent, according to Bell.
“We already have a firmly established, highly successful, commercialized lower-carbon steelmaking route,” he said. “It’s pretty damn sustainable.”
