Aluminum billets are processed at the Rio Tinto Plc DC45 Casting Centre at Complexe Jonquiere in Saguenay, Quebec, June 21, 2018.
Photo: Christinne Muschi/Bloomberg NewsWith his re-election on the ropes, President Trump has returned to his favorite household remedy: tariffs. On Thursday Mr. Trump said he is reimposing a 10% tariff on Canadian aluminum, which had been lifted ahead of last year’s United States-Mexico-Canada Agreement (USMCA).
“Canada was taking advantage of us, as usual,” the President said during a visit to a Whirlpool factory in Ohio. “The aluminum business was being decimated by Canada, very unfair to our jobs and our great aluminum workers.” Strange that he should choose Whirlpool to make the announcement.
The appliance manufacturer in 2018 complained that the President’s Section 232 steel and aluminum tariffs had significantly raised production costs. The company was able to offset some of the higher costs by raising prices, but it might not be able to run consumers through another price-hike cycle during the pandemic.
As a flashback, in May 2019 Mr. Trump exempted Canada from his Section 232 tariffs on aluminum and steel to ease the passage of the USMCA. But the agreement let the U.S. reimpose 10% tariffs if Canadian imports surge “meaningfully beyond historic volumes of trade over a period of time.” Protectionists in the White House have now invoked this provision.
U.S. Trade Representative Robert Lighthizer told the Senate Finance Committee in June that Canadian steel and aluminum imports have risen “substantially.” Aluminum imports are higher than a year ago, but first-quarter imports of primary aluminum this year were slightly lower than first-quarter imports in 2017, according to Census Bureau data. Imports of primary aluminum from Canada for the first six months of 2020 were nearly 5% lower than during the same period in 2017.
The real problem is that manufacturing has declined worldwide during the pandemic. The secretary general of the International Aluminum Institute has predicted a 5.4% drop in global aluminum demand this year compared to 2019. This has depressed prices, which fell 16% year over year in the second quarter though they’re rebounding as manufacturing revives.
The tariffs are another case of the Administration playing political favorites. The American Primary Aluminum Association, which represents two aluminum producers, Century and Magnitude 7 Metals, sent a letter to Mr. Lighthizer in May calling for the reinstatement of tariffs on Canada. The U.S. has only six primary aluminum smelters.
Yet 97% of U.S. jobs in the aluminum industry are in downstream production or processing. The tariffs will raise costs for them as well as end-users like beer companies and auto makers. A Federal Reserve paper noted last December that Mr. Trump’s Section 232 and 301 tariffs in 2018 were associated with lower manufacturing employment and higher producer prices.
The pandemic’s uncertainty has burdened businesses, and border taxes won’t help. If the U.S. walks back on its trade commitments, how can it criticize China for doing the same? The aluminum tariff is Mr. Trump at his policy worst: He hurts U.S. industry and consumers, while telling America’s friends that his word on trade can’t be trusted.
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So Much for Trump’s Trade Promise - The Wall Street Journal
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