by Jerry Dias
The American Primary Aluminum Association (APAA) recently called on the U.S. federal government to reimpose national security tariffs on certain aluminum products, arguing that a ‘surge’ in Canadian imports endangers the future of the U.S. industry.
News reports now suggest that the Trump administration is likely to grant the APAA request by reimposing 10% tariffs on Canadian aluminum exports unless the Canadian government agrees to restrict its export volumes through quotas. According to some reports, these tariffs may be announced as soon as July 1.
We need to be clear about one thing: The so-called surge the APAA is peddling is a total fabrication. It is designed to pander to Trump’s electoral base months before the U.S. presidential election by giving him the necessary leverage to boast about forcing trade concessions from Canada.
For example, APAA data showing a so-called surge of aluminum imports from Canada has been visibly cherry-picked to focus on an artificial bump caused by the resumption of Canadian exports after the 2018-19 round of tariffs. In reality, Canadian aluminum exports to the U.S. have yet to recover to their previous levels.
What the APAA neglects to mention in its letter to U.S. Trade Ambassador Robert Lighthizer is that the American aluminum industry simply does not have the capacity to satisfy domestic demand. From 1993 to 2017, the number of aluminum smelters in the U.S. declined from 23 facilities to just five.
Starved of domestic aluminum, American manufacturers are understandably looking overseas to secure needed supplies. Something the U.S. administration has made it very easy to do, especially when it comes to non-Canadian suppliers.
Subsidized Chinese aluminum products have been granted billions of dollars in tariff exemptions, which ultimately lowers the demand for homemade primary aluminum. The U.S. administration also continues to overlook Mexico’s failure to implement a robust import monitoring system, which has allowed a flood of cheap offshore aluminum to sneak through the backdoor, most notably from Russia.
All of this has meant that the real surge of aluminum to the U.S. has come from non-Canadian sources. While Canadian aluminum satisfied nearly 50% of the United States’ aluminum demand in 2010, it has since fallen to 43%. Meanwhile, non-Canadian sources have more than doubled over that time, and now represent nearly 40% of American aluminum consumption (up from 18% in 2010).
Even the Aluminum Association of the U.S. — representing Alcoa Corp., Rio Tinto Group, and numerous aluminum parts manufacturers — has confirmed that Canadian imports are virtually unchanged from 2017 and identifies Chinese overcapacity as the real problem. Unfortunately, fact-based arguments tend to fall on deaf ears with this particular U.S. administration.
Upon hearing all this, Canadians might be asking themselves what the big deal is. The Canadian aluminum industry survived a previous round of tariffs, so why would it be any different this time around?
That fact is the recent decline in prices and drop in demand — partially caused by the COVID-19 pandemic — means that a second round of tariffs would be far more costly to Canada’s aluminum industry.
While higher aluminum prices in 2018-19 meant that the cost of tariffs could be partially passed onto consumers of primary aluminum, there is less room for Canadian producers to take a 10% hit this time around. In all likelihood, a significant number of smelters in Canada will be forced to shut their doors and hundreds, if not thousands, of Canadian workers will be forced into unemployment.
This is not a scenario we can afford to risk.
I have called on the prime minister to reject any concessions that would see Canada limit its exports to the U.S. Under no circumstances should a select group of industry insiders be rewarded for deploying bully tactics and launching a misinformation campaign.
Canada did not buckle on quotas in recent trade negotiations with the U.S., and there is no reason to give in to those demands now.