Trump reimposes Canadian aluminum import tariff to stem ‘flood’

The Trump administration will reimpose tariffs on some Canadian aluminum imports, hitting a crucial trade partner just weeks after the president’s landmark North American trade agreement went into effect. Canada threatened retaliation.

President Donald Trump announced Thursday that he’s removing Canada’s exemption from 10% tariffs, effective Aug. 16. The decision comes more than a month after U.S. Trade Representative Robert Lighthizer expressed concern about recent struggles by American aluminum producers, who have said they are hurting from a “surge” of metal from Canada flowing into the U.S.

“Several months ago, my administration agreed to lift those tariffs in return for a promise from the Canadian government that its aluminum industry would not flood our country with exports and kill all our aluminum jobs, which is exactly what they did,” Trump said during a speech at a Whirlpool Corp. factory in Ohio. “Canadian aluminum producers have broken that commitment.”

“In response to the American tariffs, Canada intends to swiftly impose dollar-for-dollar countermeasures,” Deputy Prime Minister Chrystia Freeland said in a statement, calling the U.S tariffs “unwarranted and unacceptable.”

Trump made the announcement at a time when he’s behind Democrat Joe Biden in the polls and trying to portray himself as best positioned to revive the U.S. economy from a recession caused by the coronavirus—even as some economists have questioned the benefit to the U.S. of imposing tariffs.

“To be a strong nation, America must be a manufacturing nation and not be led by a bunch of fools—that means protecting our national industrial base. We have to protect our great companies and our great workers,” Trump said.

Earlier, Bloomberg News reported that the measures would be unveiled as soon as Thursday, causing shares of aluminum producers Alcoa Corp. and Century Aluminum Co. to surge as much as 5.6% and 6.1% respectively, and the price to ship aluminum to the U.S. Midwest climb as much as 21%.

The tariffs will drive up costs for end users such as brewers, Jim McGreevy, the president and chief executive officer of the Beer Institute, said in a phone interview. “The tariffs aren’t bringing back aluminum jobs, they’re creating higher costs for end users and that’s not really good for anyone.”

That sentiment was echoed by the U.S. Chamber of Commerce.

“These tariffs will raise costs for American manufacturers, are opposed by most U.S. aluminum producers, and will draw retaliation against U.S. exports—just as they did before,” the group said in an emailed statement. “We urge the administration to reconsider this move.”

Raw Metal

The tariff will affect “non-alloyed unwrought aluminum articles from Canada, commensurate with the tariff imposed on such articles imported from most countries,” according to a proclamation from the White House. That raw material made up abut 73% of all Canadian aluminum imports—including value-added products—in the first half of the year, according to U.S. Census Bureau data.

A spokesperson from Deputy Prime Minister Chrystia Freeland’s office didn’t respond to a request for comment. Canadian trade and business groups panned the move.

“Tariffs were the wrong instrument when they were first imposed in 2018, and they remain the wrong instrument now,” the Canadian Chamber of Commerce said. “At a time when our economies are struggling with the economic fallout of Covid-19, these tariffs will only exacerbate disruptions to North American supply chains.”

Raising Costs

“Re-imposing tariffs only raises costs for U.S. consumers and businesses in the middle of economic recovery efforts,” the Aluminium Association of Canada said in a statement. “Since there is no surge in aluminium exports from Canada to the U.S., all options for retaliation should be considered by Canada.”

Alcoa, the biggest U.S. aluminum producer, which has some smelters in Canada, said in an emailed statement it was “disappointed” that the U.S. decided to reimpose the tariffs.

“We are working with our U.S. customers to minimize any negative impacts to the integrated supply of aluminium in North America,” a Rio Tinto Plc spokesperson said in an email, adding that the tariffs undermine “market confidence in secure supplies of aluminium in North America.”

The decision was applauded by Century, a producer that had supported tariffs.

“The president’s leadership helps to secure continued domestic production of this vital strategic material and level the playing field for thousands of American aluminum workers,” CEO Michael Bless said in an emailed statement.

In July, Canadian Ambassador Kirsten Hillman said that the U.S. should be “patient” about determining whether to impose the tariffs, saying the increase in the production of raw aluminum is temporary because producers shifted from value-added products amid a drop in demand during the pandemic.

Aluminum traded on the London Metal Exchange, the global benchmark for prices, is down almost 2% this year as demand evaporated due to lockdowns put in place to stem the global pandemic. This sent shockwaves through the industry, pummeling aluminum producers not only in the U.S., but from Canada to Russia to China and the Middle East.

Despite the downturn, China is on track to increase its aluminum output in 2020, according to Bloomberg Intelligence. The world’s largest producer and consumer of the metal could boost domestic output by 3% as some producers closed down old facilities to build new plants that are more efficient and lower cost. This also comes as demand has recovered from the virus outbreak since April.

“Tariffs do not address the issue of Chinese overcapacity, which is the fundamental issue challenging primary aluminum production,” Alcoa said.