Tariffs to Set US Materials Up for Best Earnings in Five Years
Executive Summary
In the shifting sands of global trade, US tariffs are emerging as a double-edged sword. While they stoke fears of deglobalization and inflate trade, they are poised to deliver a windfall for the US materials sector. As of early 2026, projections paint a rosy picture: earnings in this corner of the S&P 500 could surge by around 20% this year, outpacing all but the tech behemoths. This marks the strongest growth in half a decade, driven by protective duties on steel, aluminium, and critical minerals that shield domestic producers from cheap imports.
At the heart of this boom lies supply chain resilience. The Trump administration’s aggressive tariff regime—building on Section 232 measures—has created pricing floors for metals and commodities, insulating firms from volatile global pricing. Steelmakers like Nucor and Steel Dynamics are forecast to see profits leap over 30%, as import volumes dwindle and domestic demand from infrastructure and data centres swells. Yet, this resilience comes at a cost. Broader economic ripples, including higher input prices for downstream industries, could exacerbate the UK’s Cost of Living Crisis through pricier imports and fuel the EU’s push under the Green Deal for alternative sourcing.
Drawing from the IMF’s World Economic Outlook, global growth is holding at 3.2% despite tariff headwinds, with US expansion at 2%—a modest upgrade reflecting less disruption than feared. The World Bank warns of a trade slowdown to 2.3% in 2025, extending into 2026, as policy uncertainty bites. For institutional investors and policy wonks, the takeaway is clear: materials offer a hedge against deglobalization, but vigilance is key amid US-China frictions and EU realignments.
This analysis dissects the geopolitical tinderbox fuelling these tariffs, their ripple effects across tech, energy, and finance, and the regulatory guardrails shaping the horizon. A mini case study on Nucor underscores the on-the-ground gains. In the end, actionable bets emerge for those navigating this tariff-torn terrain—position for resilience, but brace for blowback.
Geopolitical Context: US-China Tensions and the Deglobalization Imperative
The dawn of 2026 finds the world economy in a precarious truce, with US-China relations as the fault line. President Trump’s return has supercharged a tariff offensive, delaying but not derailing duties on Chinese semiconductors until mid-2027. This follows a fragile November 2025 deal that eased Beijing’s rare earth export curbs in exchange for US leniency on magnets and critical minerals—vital for everything from EV batteries to fighter jets. Yet, trust is thin. China, over 80% of global rare earth processing, has slapped its strictest controls yet on exports with even trace Chinese content, hammering US defence chains.
These skirmishes amplify deglobalization trends. The USTrade Inflation, clocking a $52.8 billion gap in September 2025 alone, underscores the imbalance: imports surged 3% amid pre-tariff stockpiling, while exports lagged. Federal Reserve minutes from December highlight how tariffs, alongside a weakening dollar (down 8% in 2025), could stoke inflation without denting it much. For US materials firms, this is manna: duties up to 50% on steel and aluminium from rivals like Brazil create a moat, boosting pricing power and local production.
Beyond bilateral barbs, multilateral fault lines deepen the divide. EU-US alignment, once a bulwark against Chinese dominance, frays under tariff crossfire. A nascent Trade Framework Agreement, inked in August 2025, eyes stability but may drag into late 2026 amid Brussels’ ire over US steel levies. European businesses brace for amplified hits in 2026, as front-loading fades and US duties ripple into higher costs for autos and renewables. The IMF notes this “policy uncertainty” has tempered global trade growth, with exports defying odds at 5-6% in 2025 but poised to falter.
In this cauldron, supply chain resilience isn’t optional—it’s survival. US materials producers, long battered by offshoring, now pivot to “friendshoring” with allies like Canada and Australia. Yet, as the World Bank cautions, cumulative tariffs risk a sharp trade slowdown, echoing the 2018-2019 trade war but on steroids. For policy analysts in Washington, London, and Brussels, the question looms: can tariffs forge resilience without igniting a full deglobalization inferno?