Shares of Alcoa (AA) plunged 5.23% in pre-market trading on Thursday, as investors reacted to the aluminum producer's warning of a significant tariff impact despite reporting better-than-expected first-quarter earnings. The stock's decline comes amid broader market concerns over escalating trade tensions and their potential economic consequences.

Alcoa reported first-quarter adjusted profit that handily topped Wall Street estimates, but revenue of $3.37 billion fell short of the forecasted $3.51 billion. However, the company's outlook overshadowed its strong performance. Alcoa revealed it had incurred about $20 million in costs related to tariffs on aluminum imports from Canada in the first quarter, following the implementation of a 25% tariff on global steel and aluminum imports in mid-March. More alarmingly, the company expects these tariff costs to surge to $90 million in the second quarter.

The steep increase in tariff-related expenses has raised concerns about Alcoa's profitability in the coming quarters. CEO William Oplinger stated that it would be impractical for the company to increase U.S. aluminum production in the short term to offset the impact of these tariffs. This admission, coupled with the broader implications of the ongoing trade disputes between the U.S. and its trading partners, has likely contributed to the negative sentiment surrounding Alcoa's stock. The situation underscores the challenges faced by U.S. manufacturers as they navigate the complex landscape of global trade policies and their financial repercussions.