LONDON, June 2 (Reuters) - U.S. President Donald Trump

plans to double tariffs on steel and aluminium imports to 50%

from Wednesday, stepping up pressure on global steel producers

and deepening his trade war.

WHY IS TRUMP DOUBLING TARIFFS?

Trump aims to support and encourage investment in domestic

production of steel and aluminium, both vital materials for

construction. Aluminium is also used in the transport and

packaging industries.

But these tariffs have already fuelled higher costs for

steel and aluminium consumers, and undermined manufacturing,

while hurdles in the form of higher power prices are high.

Roughly a quarter of all steel used in the U.S. is imported,

the bulk of it from neighbours Mexico and Canada.

Around half of all aluminium used in the U.S. is imported,

with the vast majority coming from Canada, which exported 3.2

million tons of the metal to the United States last year.

WHAT HAS BEEN THE IMPACT OF TARIFFS ON U.S. PRICES?

Consumers buying aluminium on the physical market in the

United States pay the aluminium price on the London Metal

Exchange plus a physical market premium which covers

costs including freight and taxes.

The premium jumped 54% on Monday to 58 U.S. cents a

lb or $1,279 a metric ton from Friday. This year so far the

premium has climbed more than 120%.

Goldman Sachs said the premium would need to rise to between

$0.68 and $0.70 per lb to fully reflect the 50% import tariff.

Hot rolled coil (HRC) steel prices on COMEX climbed

6% to a session high at $910 a short ton or $1,003 a metric ton.

"The U.S. is a net importer of steel, so we require imports

to satisfy demand," said Josh Spoores, Head of Steel Americas

Analysis at consultancy firm CRU. "This action will not stop

imports from coming in, it will only raise domestic prices for

steel consumers in the U.S., such as manufacturers."

U.S. manufacturing, heavily reliant on imported raw

materials, contracted for a third straight month in May, to a

six-month low, while factories continued to shed jobs, data from

the Institute for Supply Management (ISM) showed.

WILL THE TARIFFS SUPPORT U.S. PRODUCTION?

Higher steel and aluminium prices will boost profits for

local U.S. producers such as Nucor ( NUE ), but building

smelters could take five years, possibly more, analysts say,

taking completion to a time beyond Trump's tenure in the White

House.

Trump said on Friday that Nippon Steel ( NISTF ), aiming to

buy U.S. Steel, would invest billions of dollars to

modernize U.S. steel mills to increase production.

Emirates Global Aluminium (EGA) last month announced plans

to build the first new primary aluminium production plant in the

United States since 1980. The plant is expected to have capacity

of 600,000 tonnes of primary aluminium a year.

Century Aluminum ( CENX ) with federal funding is also

aiming to build a new "green" low-carbon aluminium smelter.

Power prices are another challenge for any company trying to

produce aluminium in the United States - and were behind the

closure of most U.S. smelters - because of difficulties agreeing

competitive long term power purchasing contracts due to a range

of factors including regulations and volatile markets, industry

sources said.