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On May 30, 2025, President Donald Trump announced a dramatic escalation in trade policy, doubling tariffs on foreign steel and aluminum imports from 25% to 50%. Speaking at U.S. Steel’s Mon Valley Works–Irvin Plant near Pittsburgh, Trump framed the move as a bold step to “further secure the steel industry in the United States” while celebrating a murky “partnership” between U.S. Steel and Japan’s Nippon Steel. But what does this mean for the oil and gas industry, particularly oilfield service companies that rely heavily on steel for drilling rigs, pipelines, and well casings? Will these tariffs lead to cheaper domestic steel or saddle the sector with higher costs?
Let’s break it down.
The Tariff Hike and the Nippon-U.S. Steel Deal
Trump’s tariff announcement comes on the heels of a complex and controversial deal involving U.S. Steel and Nippon Steel. Initially, Nippon’s $14.9 billion bid to acquire U.S. Steel was met with fierce opposition from both Trump and President Joe Biden, who cited national security concerns and the risk of foreign control over a critical American industry. Biden blocked the deal in January 2025, but Trump reversed course in April, ordering a new review and ultimately endorsing a “partnership” that allows Nippon to invest billions in U.S. Steel without full ownership. Details remain vague—some call it an acquisition in disguise—but the deal promises $14 billion in investments, including $4 billion for a new steel mill, and claims to create 70,000 jobs.
The tariff hike is positioned as a protective measure to shield domestic steelmakers, including the newly bolstered U.S. Steel, from foreign competition. Trump argued that the previous 25% tariffs were insufficient, allowing foreign producers to “get over the fence” and flood the U.S. market with cheap metal. By raising the barrier to 50%, effective June 4, 2025, the administration aims to incentivize domestic production and ensure American control over critical supply chains.
Impact on the Oil and Gas Market
The oil and gas industry is a steel-intensive sector, relying on the metal for everything from drilling rigs and pipelines to storage tanks and oil country tubular goods (OCTG), such as well casings. Oilfield service companies like Halliburton, Patterson-UTI, and ChampionX are particularly vulnerable to fluctuations in steel prices, as they operate on tight margins and must balance equipment costs with competitive pricing for drilling, fracking, and completion services.
Higher Costs for Oilfield Services
Industry experts are sounding the alarm: the 50% tariffs are likely to drive up steel costs for oilfield service providers. Steel is a global commodity, and while the tariffs aim to boost domestic production, the U.S. relies on imports for about 25% of its steel and over half of its aluminum, with Canada and Mexico as top suppliers. The tariffs will increase the cost of imported metals, and domestic producers, insulated from cheaper foreign competition, may raise prices to match. A Reuters report from March 2025 noted that earlier 25% tariffs already raised costs for energy firms, with Patterson-UTI’s CEO Andy Hendricks estimating that 14% of their purchases come from tariff-impacted countries.
Wood Mackenzie analyst Nemeth highlighted that OCTG, critical for onshore wells, accounts for 8.5% of drilling and completion costs in the Lower 48 states. A 25% price increase in OCTG could add 2.1% to well costs—a figure that could double under the new 50% tariffs. Companies like Tenaris, a key supplier of steel pipes, are monitoring the impact, while shares of Patterson-UTI and ChampionX have already dropped 16% and 3.3%, respectively, since the tariff plans were first floated in February.
These higher costs are likely to be passed on to exploration and production (E&P) companies, particularly smaller producers exposed to spot market pricing. For consumers, this could translate to higher energy prices down the line, especially if tariffs persist through peak demand seasons. Posts on X reflect industry frustration, with one user noting that oil companies will face increased costs for casings, forcing service providers to charge more to maintain profitability.
Will Domestic Steel Get Cheaper?
On the flip side, could the tariffs and the Nippon-U.S. Steel partnership lead to cheaper domestic steel? The administration argues that protecting U.S. producers and incentivizing investments—like Nippon’s $14 billion commitment—will boost domestic capacity and stabilize prices over time. During Trump’s first term, steel tariffs led to a brief increase in domestic production, with capacity utilization reaching 80% in 2021. However, prices initially spiked before falling as demand softened.
The Nippon deal could modernize U.S. Steel’s aging facilities, potentially increasing efficiency and output. Nippon has pledged not to import steel slabs that compete with U.S. Steel’s blast furnaces, which could prioritize domestic supply for industries like oil and gas. However, analysts are skeptical that these benefits will materialize quickly. Capital Economics notes that while tariffs may spur domestic production, near-term price hikes are inevitable as supply chains adjust. Moreover, the deal’s structure—described by some as “purposely opaque”—raises questions about whether U.S. Steel will truly remain American-controlled or if Nippon’s influence will drive priorities.
Broader Economic Implications
The tariffs are part of Trump’s broader trade war strategy, which includes reciprocal tariffs and targeted levies on countries like Venezuela and China. Economists warn that these policies could fuel inflation, with the Tax Foundation estimating an average tax increase of $1,200 per U.S. household in 2025. For the oil and gas sector, higher steel costs could exacerbate existing challenges, such as policy uncertainty and retaliatory tariffs from trading partners like Canada, which supplies 24% of U.S. steel imports.
Retaliation is already underway. Canada imposed $20.7 billion in retaliatory duties on U.S. exports, including oil and gas, effective March 13, 2025. The European Union and China have also signaled countermeasures, which could disrupt global supply chains and further squeeze energy markets.
What’s Next for Oilfield Services?
For oilfield service companies, the path forward is fraught with challenges. Higher steel costs will likely force providers to raise prices, potentially slowing drilling activity among cost-sensitive E&P firms. Smaller operators, already stretched thin, may delay projects, while larger players like Venture Global and Energy Transfer have warned in regulatory filings that tariffs could inflate project costs, particularly for construction reliant on foreign-sourced steel.
However, there’s a glimmer of hope. If the Nippon-U.S. Steel partnership delivers on its promise of modernized facilities and increased domestic production, oilfield services could eventually benefit from a more stable, localized supply of steel. The catch? These benefits may take years to materialize, while cost increases are immediate. Industry players will need to navigate this uncertainty by exploring cost mitigation strategies, such as long-term supply contracts or alternative materials, though options are limited given steel’s critical role.
The Bottom Line
President Trump’s decision to hike steel and aluminum tariffs to 50% is a high-stakes gamble to protect domestic industry and bolster the Nippon-U.S. Steel partnership. For the oil and gas sector, the immediate outlook is clear: oilfield service companies will face higher steel costs, likely passing those expenses onto producers and, ultimately, consumers. While the tariffs and Nippon’s investments could strengthen domestic steel production in the long run, the short-term pain for energy firms is undeniable. As one X user put it, “This will raise the cost for us, oil companies, they need steel for casings.”
There is a balancing act going on, and I, for one, am thrilled with the support that President Trump is giving US Steel. This is a much bigger issue than a cost upgrade to the oilfield service crews. Let’s also look at the EU and the UK. They are letting Net Zero policies dictate their steel plants. They are closing their coal-fired furnaces and going to electric furnaces. This is a death blow to business, as you can only use recycled steel and not even reach military-grade levels.
With the United States needing to re-enter shipbuilding and manufacturing in the U.S., we require steel derived from coal. Through automation and control, costs can be reduced, but for me, as I evaluate an oil well, the amount of steel required becomes a bigger reason to consider shallower wells. Markets will level out, but the US economy will be much better off with this path. And tariffs are a good thing when used correctly.
The Energy News Beat will continue to monitor how these tariffs reshape the oil and gas landscape. Will Trump’s trade policies deliver a stronger American steel industry, or will they choke an already strained energy sector? Drop your thoughts in the comments below, and stay tuned for updates.
Sources: Reuters, The New York Times, CNBC, PBS News, Bloomberg, NPR, Council on Foreign Relations, The Guardian, Tax Foundation, BBC, White House, Fox Business, AP News, CBS News, Business Insider Posts on X
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Always conduct your own research before making business decisions.
The post Trump Doubles Down on Steel and Aluminum Tariffs: What It Means for Nippon-U.S. Steel and the Oil & Gas Industry appeared first on Energy News Beat.
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