Morgan Stanley: Steel/Aluminum Tariff Overhaul — Official Proclamation Offers Clarity, But Range of Outcomes Remains Wide

The Trump administration formally signed a proclamation overhauling steel, aluminum, and copper tariffs, expanding the scope of metal derivative products and setting differentiated rates. Most large machinery equipment—including bulldozers, harvesters, bearings, transmissions, and locomotives—will be subject to a 25% ad valorem duty on full product value, rather than a 50% tariff on metal content alone. Certain metal-intensive industrial and power grid equipment qualify for a temporary 15% rate through 2027. Products made entirely from US-sourced metals overseas face a lower 10% tariff, while items with no more than 15% metal content are exempt from Section 232 duties. Morgan Stanley notes that while the proclamation provides clarity, the practical impact varies widely depending on each company's import structure. The traditional strategy of buying domestic premium producers like Caterpillar and Deere may persist, though Caterpillar carries the highest post-tariff bill as a percentage of sales. Analysts caution investors to monitor second- and third-order effects on product demand and earnings, as end customers already face elevated inflation, interest rates, and macroeconomic uncertainty.