American steel manufacturers have largely embraced President Trump’s 25% tariffs on imports, which remain in effect even as the administration begins a 90-day “pause” on tariffs on most countries.
Industry groups, including the Steel Manufacturers Association, have praised the tariffs as a means of boosting U.S. steel competitiveness. The European Union, meanwhile, hit back with its own tariffs on American-made steel, set to start next week.
The U.S. is already relatively independent when it comes to steel — producing around 75% domestically. But the escalating trade war with China, and the EU’s reciprocal 25% tariff may hamper domestic green steel in particular, leaving a gap that China is already stepping up to fill.
Trump’s back-and-forth tariffs make it harder for U.S. green steel manufacturers to reach the EU, which is currently the largest market thanks to stringent environmental policies, said Chingis Idrissov, a technology analyst at research firm IDTechEx.
Ultimately, Idrissov said, China “could benefit substantially” from disruption to U.S. green steel supply. “Companies in Europe really want to start using green steel, primarily in the automotive and construction spaces,” he added. “And Chinese players are beginning to align with the market demand and upcoming EU regulations.”
China’s HBIS, the world’s fifth-largest steel producer, is actively scaling up its hydrogen-based production to align with global net-zero targets. It’s currently using more than 60% hydrogen in its feed gas mix for producing direct reduced iron — a key intermediate product in steelmaking — at its plant in Hebei Province. HBIS is targeting full-scale production of green steel at that plant next year, as part of a deal with BMW. The company says it plans to transition entirely to green steel by 2050.
And HBIS is far from alone. China Baowu Steel Group — the world’s largest maker of steel — is also positioning itself as a leader in green steel production. In January, it partnered with Australian iron ore giant Fortescue to “help further accelerate the development of green iron technology.”
Those announcements, among others, indicate China is “realizing that carbon emissions are something that the world cares about,” said Catherine Wolfram, an energy and economics professor at MIT. China is thinking ahead to the state of global markets in the next decade, while the U.S. is narrowing its economy. “And that’s one thing if the rest of the world is standing still, but they’re not,” she said.
“From a climate perspective, it’s good if China makes huge investments in green steel,” Wolfram added. “But from a U.S. competitiveness perspective, if that’s the way the world is going, toward clean versions of these products, we’re losing ground.”
The cost of domestic production
Much of the industrial equipment required to make green steel, like electrolyzers for producing green hydrogen, is currently made in Europe, explained Idrisso.
Because of that, the construction cost of green hydrogen plants will rise, making green hydrogen more expensive. That in turn drives up the required capital investment for a U.S. green steel plant, Idrissov explained.
“It makes green steel more expensive than it previously was on paper,” he added. Green hydrogen plants that colocate with offtakers in heavy industry could have an advantage if they don’t have to export any of their product, or ship it long distances across the U.S.
“But I honestly haven’t seen significant development right now in the U.S. in terms of projects actually moving ahead from the planning stage to the more advanced stages,” Idrissov said. That’s partly because of uncertainty around federal funding, including for the planned hydrogen hubs.
Without tariffs, the U.S. is well-positioned to capitalize on growing demand for low-carbon steel, he added. With the tariffs, it’s unlikely that the hydrogen supply needed to meet currently-planned transitions away from natural gas will be available, let alone expanding production.
