Trump's 50% steel tariff could see prices tank in Europe — and soar in the U.S.

U.S. President Donald Trump surprised markets yet again with an abrupt announcement on Friday that he will hike tariffs on steel imports from 25% to 50% on Wednesday.

But while the inflationary impact on U.S. domestic prices is widely expected to be severe, the effect in Europe will be more mixed, according to analysts — with some buyers and manufacturers able to benefit from lower prices.

"This was an absolute surprise. Already steel prices in the U.S. are higher than anywhere else, and it is a net importer which needs to have volumes coming in. All this does is raise prices there," Josh Spoores, head of steel Americas analysis at CRU, told CNBC on Monday.

Canada and Mexico are the biggest exporters of steel to the U.S., with other major sources including Brazil, South Korea and Germany.

The latest tariff news could see steel redirected to other markets such as Europe, Spoores said, putting downward pressure on prices.

"Some manufacturers in Europe might do better building products that are steel intensive at home and exporting them to the U.S. as prices rise there," he continued. "Automotives, construction products and appliances are all products that are going to feel the impact."

He said that, in Europe, steel buyers are potentially winners.

But not all companies are expected to benefit.

Rella Suskin, equity analyst at Morningstar, noted in emailed comments that Germany's BMW had separated out the expected impact of different tariffs in its 2024 results and flagged a negative effect — to the tune of "a high three-digit million amount" — from the existing 25% steel and aluminum duties.

BMW shares were 1.8% lower in early afternoon deals on Monday, with the wider European autos sector down 1.8%. Suskin continued that some of the impact of 50% tariffs would be offset for BMW by the recent loosening of autos restrictions by Trump, and also flagged the potential for a future deal between the White House and German automakers.

Danish wind energy developer Orsted could also be negatively impacted, Citi analysts led by Jenny Ping said in a note to clients, because it does not have a local offshore wind turbine supply chain in the U.S.

Trump's latest moves will have a major impact on Europe's steel industry — which is still reeling from the 25% duty imposed in March — according to Kaye Ayub, head of price analysis and forecasts at U.K.-based steel market consultancy MEPS International.

"Steel demand is already low across Europe, eroding prices and domestic steelmaker's profit margins. This has forced many producers to cut production and close plants as they struggle to compete with low-cost steel imports produced in countries where production costs are much lower," she said.

The European Union sharply criticized Trump's announcement over the weekend, threatening countermeasures and arguing that the decision "adds further uncertainty to the global economy and increases costs for consumers and businesses on both sides of the Atlantic."

Any curtailment of the 3.89 million metric tons of EU-produced steel that was exported to the U.S. in 2024 due to trade barriers would "likely exacerbate steel oversupply in Europe, applying increased downward pressure to selling prices," Ayub noted.

She agreed that some low-cost Asian-origin steel destined for the U.S. will be diverted to Europe. "Even with the EU and U.K.'s trade defense measures, this could undermine domestic producers' attempts to maintain profitability."

Conversely, U.S. steelmakers may benefit from higher selling prices if further increases now occur, even as costs increase for U.S. manufacturers and stoke inflation, she added.

It remains unclear what Trump's latest jolting of the market could mean for the U.K., which announced the outline of a U.S. trade deal in May but has not yet secured an exemption from steel tariffs.

Gareth Stace, head of industry body UK Steel, said in a statement that domestic steel firms were "fearful that orders will now be canceled, some of which are likely being shipped across the Atlantic."

Overall, Trump's latest announcement adds to the growing headache for almost all businesses as a result of volatile trade policy, said CRU's Josh Spoores.

"I don't expect this to be policy in three months. Even three weeks it's unclear," he told CNBC.

"These tariffs are at such a high level and in the U.S. they will affect a massive community of manufacturers which make a huge contribution to GDP and employment, so there will be lobbying on this."

— CNBC's Ganesh Rao contributed to this story.