Aluminum Tariff Woes: Between 2 Stocks, 1 Shines Brighter

Key Points

• The Trump administration’s 25% tariffs on aluminum will likely result in certain companies winning and losing.
• Century Aluminum was a tariff winner in the first Trump administration, and the company believes it will be again this time.
• Alcoa is an industry leader but has heavy exposure to Canada, which may mean layoffs are coming.

Many issues are creating uncertainty for investors, but tariffs are one of the main ones in 2025. In mid-March, the Trump administration announced 25% tariffs on all steel and aluminum products entering the United States. The stated purpose of the policy is to level the playing field and reduce the trade imbalance between the United States and many countries.

One of those countries is Canada. Investors should take note if considering industrial stocks. Specifically, one aluminum stock is a Buy, while another remains a Hold.

A Repeat of Trump 1.0?

The aluminum manufacturer that appears to be a likely winner is Century Aluminum Co. NASDAQ: CENX, which is a small-cap stock. The Chicago-based company produces standard-grade and value-added primary aluminum products in the United States and Iceland.

According to David Whitmore, the technical manager of Century Aluminum’s Sebree plant, history suggests the tariffs will benefit the company’s workforce. In 2018, when the Trump administration imposed similar tariffs, the company was able to bring back hundreds of jobs at its Hawesville, Kentucky plant.

Unfortunately, that plant was idled in 2022 due to high energy costs. But the current tariffs will likely bring those jobs back. Plus, the company says it may be able to add a new smelting facility in the United States.

CENX stock has already been up 71% in the last 12 months and is up 10% in 2025. That’s an impressive accomplishment at a time when many small-cap stocks continue to lag the broader market. Much of that gain is due to the company’s strong earnings report, in which the company posted year-over-year (YOY) revenue gains of 22% and an 8% gain in earnings per share (EPS) on a YOY basis.

Since the tariff announcement, the stock’s price movement has pushed it above its 50-day simple moving average. That’s a bullish sign, and analysts give CENX stock a consensus Buy rating with a price target of $24.33, which would be a 23.8% gain from its price as of March 19, 2025.

Alcoa’s Strength Is Now a Liability

Alcoa Corp. NYSE: AA is one of the most recognized names in the aluminum industry. The mid-cap company has a current market cap of around $9 billion. At first glance, it appears that rising tariffs would benefit it significantly.

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But it comes with a note of caution. Alcoa outsources a significant percentage of its manufacturing to Canada. That’s not without good reason. Canada has access to an abundance of inexpensive hydropower, which means it can produce aluminum at a much lower cost.

This is where it’s important to keep in mind that tariffs are about where the product is brought in from. It doesn’t matter if the parent company is domiciled in the United States. Alcoa has noted that this production can be brought back into the United States, but it can’t be done quickly and won’t be cheap.

That's why Alcoa’s chief financial officer, Molly Beerman, remarked that the company was focused on gaining a Canadian tariff exemption. Without the exemption, the company believes it will have to lay off workers.

Alcoa posted a strong first quarter, with revenue and earnings up significantly year over year. However, much of that is attributed to customers' front-running orders due to tariff uncertainty.

With Alcoa set to report earnings on April 12, investors won’t get hard numbers about the tariffs for another quarter. But the expectation is that guidance will be weak. That could be a reason why AA stock is down about 9% in 2025 and is only up about 15.5% in the last 12 months.

The tariff announcement did cause the stock to reverse above a support level of $28. That may give the stock a higher floor, but the question is, how high is the ceiling? Analysts are bullish on AA stock, with a consensus Moderate Buy rating and a price target of $50.17, which would be a gain of 42%. However, investors may want to wait until the company's earnings report before making a decision on the stock.