How Trump’s tariff war hurts ASX mining stocks BHP, RIO, FMG and MIN

Just weeks into his administration returning, US president Donald Trump has unleashed a salvo of tariffs on various goods imported into the US. These tariffs, along with many reciprocal counter tariffs implemented by the US’s trading partners, have thrown financial markets into chaos as investors attempt to understand the impact of the escalating trade war on global trade, economic growth, and inflation.

ASX mining stocks are destined to be caught in the cross-fire as tariffs impact the demand for the commodities they produce, and by extension, commodity prices. This article aims to quantify the impact of President Trump’s trade war on the key commodities of iron ore, coal, aluminium, and copper, as well as the potential share price fallout for companies like BHP Group (ASX: BHP), Rio Tinto (ASX: RIO), Fortescue (ASX: FMG), and Mineral Resources (ASX: MIN).

Iron Ore and Metallurgical Coal

Iron ore and metallurgical coal are the two key inputs of steel production – and are two of the key commodities for a swathe of ASX listed mining stocks. President Trump’s blanket 25% tariff on steel imports into the US, which commenced Tuesday, threatens to crimp demand for these commodities at a time when major steel producer China is eying further production cuts.

The tariffs, layered atop existing duties, are arguably aimed at breaking China’s dominance in global steel production as well as boosting domestic US production. China accounts for around 54% of global crude steel production and directly competes in key Asian markets against higher-cost US producers.

For China, the stakes are high. In a recent research report, UBS proposed a mild trade war scenario, defined as a 10% additional tariff, could shave 0.3-0.4% off China’s GDP. The impact could escalate to a massive 2.5% hit by 2026 under an aggressive trade war scenario, defined as an additional 60% tariff.

Steel production would invariably face headwinds even in the mild scenario if China’s economy slowed as a result of the trade war. Some economists’ estimates peg a 5-10% decline in Chinese steel output, and a similar corresponding decline in its iron ore imports. However, as most brokers had already factored in some degree of official steel output cuts to be enforced by Chinese authorities this year, it may be difficult to determine what’s tariff related and what’s not.

The outlook for iron ore prices is mixed, however, as broader macroeconomic factors within China hold more sway on its iron ore demand. Most analysts expect Chinese growth will be more dependent on the competing factors of slowing growth and stimulus measures. Morgan Stanley believes iron ore demand is likely to soften in the short-term as China’s infrastructure push falters, while UBS sees a longer term recovery if stimulus measures deliver expected outcomes.

Pivoting to metallurgical (“met”) coal, China retaliated swiftly to President Trump’s steel tariffs and the blanket addition of another 10% tariff to those imposed in his first administration, with a 15% tariff on US coal and liquefied natural gas, plus 10% duties on crude oil and autos.

According to Morgan Stanley, only 9% of China’s 119 Mt met coal imports were sourced from the US last year. This was dwarfed by imports from Mongolia (46%) and Russia (25%). The broker suggests that as China shifts away from US met coal it could tighten supply marginally, but domestic output and alternatives would likely mute the overall impact. As for met coal prices, Morgan Stanley notes the current oversupply environment will continue to cap any tariff-related price spikes.

If anything, the consensus among the major research houses is that US steel tariffs are likely to hurt US steel consumers more than they’ll hurt global steel producers. A recent Goldman Sachs report on the subject proposed US domestic steel prices could rise by the full 25% tariff amount once destocking completes over the next three months.

US automakers are particularly at threat, noted the broker, as higher prices for auto-grade steel will squeeze their margins at a time when high product inventories will delay their ability to pass on price hikes to consumers. If/when price hikes are passed on, consumers are likely to also suffer from steel tariffs.

It could be a double whammy for consumers as the Federal Reserve weighs broader tariff-based inflation against further interest rate cuts (UBS has warned of a +0.2% bump to US inflation in a mild scenario and up to 1.5% in an aggressive scenario).

Aluminium

President Trump’s aluminium tariff, also at 25%, is potentially even more counterintuitive than his steel tariff. The US imports roughly 23% of its total steel consumption, but for aluminium, it’s closer to 85%.

UBS notes that spare capacity in the US aluminium industry is lacking, so it is unlikely that domestic production can pick up the slack created by the new tariff, and therefore stem price increases to domestic industry and consumers. Aluminium is also harder to substitute than steel, and this will further amplify price impacts, the broker says.

In the short term, most research houses expect that aluminium prices in the US will rise close to the full 25%, even as many buyers have tried to front-run the March 12 implementation. So again, it appears the biggest losers in this segment of President Trump’s trade war are likely to be his constituents and not international producers.

Outside of the US, UBS sees little impact to the aluminium market from Trump’s tariffs as higher prices stymie US demand, therefore increasing excess capacity across the global aluminium supply chain. Producers will look to place this inventory elsewhere, suggests the broker.

Copper

So far, copper remains excluded from any direct Trump administration tariff. But the President’s rhetoric hints at future action to curb China’s growing influence in the metal’s production, at a time when copper is growing increasingly critical to the world’s energy transition.

Citi predicts that a 25% tariff on copper will be implemented by the Trump administration “by late 2025”. The broker believes that such a tariff would spark a surge in US domestic production, and this would, in the longer term, reduce the US’s reliance on the rest of the world for refined copper imports. In the short term, however, fears of looming tariffs have triggered a spike in prices for the metal on the US-based COMEX exchange compared to the London-based LME.

Citi believes the short term bump in the US copper prices is likely to be short lived as tariff positioning unwinds – but it remains positive towards copper pricing more generally due to pressure on short term physical supply and limited scrap supply growth.

ASX Mining Stocks: Winners and Losers

Impacts of the trade war on ASX mining companies can be direct, for example if a tariff positively or negatively impacts a company’s operations for the commodity in question, or indirect, for example if the broader tariff environment positively or negatively impacts global economic growth, and therefore the demand for commodities in general.

Indirect impacts have already been put into some context, as we have noted the current 10% additional tariff on China could shave 0.3-0.4% off that country’s GDP – but up to 2.5% by 2026 in an aggressive tariff environment – according to UBS. Rest of the world tariff war impacts vary from no GDP impact to around a 1.5% reduction, with UBS’ base case estimates focused on a 0.69-1.0% reduction in GDP.

Additionally, most modelling forecasts at least some inflationary impact from a global tariff war, with estimates of as little as a +0.3% bump to US inflation, to up to 1.5% in more extreme circumstances. This would likely limit the Federal Reserve’s ability to cut rates to help boost US economic growth.

So, it’s hard to see in any scenario – from mild to extreme – how ASX listed resources stocks can escape without at least some collateral damage. There are likely some direct impacts, however, and they are summarised below:

Fortescue (ASX: FMG)

• The company’s main product, iron ore, is not subject to any tariffs, and therefore impacts are expected to be indirect via a potential Chinese economic growth slowdown and steel production versus upside from ongoing stimulus measures.

BHP (ASX: BHP)

• Morgan Stanley notes that BHP contributes approximately 8% of China’s met coal imports and could benefit if Chinese coal consumers look for substitutes – however met coal pricing is likely capped due to ongoing oversupply concerns.
• BHP owns (45%) of the Resolution copper project in the US – one of the largest undeveloped copper deposits in the world – presently in permitting stage. Potential tariffs on US copper imports could expedite permitting, enhancing the long-term value of the project.

Rio Tinto (ASX: RIO)

• RBC states that RIO earns most of its profits from China, making it vulnerable to indirect risks if the trade war impacts China's economy. More specifically, given 90% of the company’s current profitability comes from iron ore, the broker anticipates little direct impacts.
• Goldman Sachs on the other hand, notes that RIO has significant aluminium operations in Canada and is responsible for nearly half of the country’s exports of aluminium products to the US. The broker notes RIO’s pricing power may limit negative impacts, as much of its Canadian aluminium production is value-added. Still, Goldman Sachs is forecasting a 5% hit to underlying earnings for the company’s aluminium division, which translates to a 1% hit to group underlying earnings.
• For the same reason, Credit Suisse favours BHP over RIO and points out the former’s coal resilience.
• Morgan Stanley notes that RIO owns the other 55% of the Resolution copper project, which potentially stands to benefit if a tariff is applied to copper later this year as many expect.

Mineral Resources (ASX: MIN)

• Little direct impact foreseen by the major brokers as MIN’s two major products, iron ore and lithium, are so far not directly impacted by tariffs. The main impacts will be indirect as China is the major consumer of the company’s production.

This article first appeared on Market Index on Friday 14 March 2025.