As the United States and Canada are approaching a trade agreement, the tariffs imposed by the United States on Canadian primary aluminum are expected to be significantly lowered from the current 50% to 25%.
This change could directly reduce the procurement costs for American enterprises and lower the US Midwest Premium for aluminum. However, it is highly likely to cause the Canadian aluminum resources that were previously redirected to Europe to flow back to North America again, thereby triggering a severe "aluminum shortage" crisis and a sharp increase in physical premiums in the European market.
The expectation of a reduction in US-Canada tariffs is heating up
Consulting firm Harbor Aluminum pointed out that "it is only a matter of time before the US lowers its tariffs on Canada" after doubling the tariffs to 50% last June. After the US raised the tariffs to 50%, Canadian exports of primary aluminum to the US dropped sharply (by 26% in 2025 and 14% since 2026).
If the tariffs are reduced from 50% to 25%, it will significantly narrow the current high premium of $1.093 per pound (approximately $2,409 per ton), completely improving the procurement costs for American enterprises.
Europe faces three major supply disruptions and is highly dependent on Canadian aluminum for emergency supplies
Europe is facing a severe aluminum shortage due to three factors: ① a complete ban on Russian aluminum; ② the closure of the Mopanez mine in Mozambique, owned by South32, in March this year; ③ the disruption of the maritime transportation of aluminum from the Persian Gulf in the Middle East due to the US-Iran war.
To make up for the shortfall, a large amount of Canadian aluminum has been redirected to Europe. The export to the Netherlands from 2024 to last year soared from 64,800 tons to 372,000 tons, and in the first eight months of this year, it increased by 98% to 215,000 tons.
The spot aluminum premium in Europe remains at a historically high level
Currently, the premium of un-tariffed aluminum on the CME is $438 per ton, and the premium of tariffed aluminum is $574 per ton. Although it has dropped somewhat from the peak during the Middle East conflict in May, this premium is still at an extremely high level that is rare in history.
The global aluminum flow is undergoing a secondary reconfiguration, and Europe may face a "high-price rush for aluminum"
Once the US-Canada agreement is implemented and the tariffs are reduced, Canadian aluminum will flow back to North America first.
What is more alarming is that, with the Democratic Party sweeping the Congress and voters being highly sensitive to living costs, if the Trump administration further exempts "allies" such as the United Arab Emirates and Qatar from tariffs on Middle Eastern suppliers, Europe will be in an absolute disadvantage in competing with the United States for global available aluminum resources, and will have to significantly increase the aluminum premium in Europe, causing downstream industries and end consumers to bear high costs.
Overall, the breakthrough in the US-Canada tariff negotiations can alleviate inflationary pressure in the United States, but it may directly transfer the supply pressure to Europe. The global aluminum supply chain is facing a new round of intense regional re-pricing after the tariff war and the Middle East conflict.
