Canada’s aluminium industry, the largest foreign supplier to the U.S., could not fully meet American import demand even if all domestic output were diverted southward, Morgan Stanley analysts said in a research note assessing potential tariff policy changes.
The United States imports roughly 80% of its aluminium consumption, with Canada historically accounting for the majority of those shipments. In the first half of 2026, U.S. imports totaled 1.68 million tonnes, averaging about 280,000 tonnes per month. Canada supplied 1.16 million tonnes during the same period, or roughly 68% of U.S. import requirements. Total Canadian aluminium production stood at nearly 1.6 million tonnes, equivalent to 95% of U.S. import needs—but still insufficient to cover the full deficit, leaving American buyers dependent on additional foreign sources.
Washington is reportedly considering reducing tariffs on some Canadian aluminium from 50% to 25%, a move that could incentivize Canadian producers to prioritize U.S. shipments over European markets, where imports enter duty-free. However, Morgan Stanley noted that the marginal tonne required by U.S. buyers would still originate from countries subject to the 50% tariff, meaning the Midwest aluminium premium would likely remain elevated to reflect that duty.
The Midwest aluminium premium has historically traded about 30% above the implied tariff cost. A partial tariff reduction could ease competition with European buyers and push the premium closer to fair value, with Morgan Stanley estimating a potential decline of roughly 10 to 12 cents per pound—about half of its current excess over tariff-adjusted levels.
European aluminium premiums may receive near-term support if Canadian shipments shift back toward the U.S., though recovering Middle Eastern supply could temper that effect. On the supply side, additional U.S. production could emerge under tariff incentives for companies expanding domestic capacity. Emirates Global Aluminium and Century Aluminum are developing a 750,000-tonne-per-year smelter in the U.S., though such projects typically take years to come online.
