The New York Times and other news media are reporting this weekend that President Donald Trump announced on Thursday that he is re-imposing a 10% tariff on Canadian aluminum “to help struggling American producers,” a step likely to incite retaliation and worsen ties with Canada just one month after the countries' new trade deal went into effect.
Speaking at a Whirlpool factory in Clyde, Ohio, the president said that he had signed a proclamation that would reimpose the levy on Canada, accusing the country of “taking advantage of us as usual.”
The U.S. imposed tariffs on steel and aluminum from Canada, Mexico and the European Union in early 2018, prompting those countries to respond with their own tariffs on American goods. The levies on imports from Canada and Mexico were not lifted until the following year, when the countries reached an agreement as part of the negotiations toward a new North American trade deal, the Times said.
But the United States retained the right to reinstate them if it observed a spike in metal imports, which Trump cited on Thursday. He accused Canadian aluminum producers of breaking their commitment.
On Thursday evening, Prime Minister Justin Trudeau announced Canada's response. “In response to the American tariffs announced today, Canada will impose countermeasures that will include dollar-for-dollar retaliatory tariffs,” he wrote. “We will always stand up for our aluminum workers. We did so in 2018 and we will stand up for them again now.”
The deputy prime minister, Chrystia Freeland, issued a pointed statement, as well. “In the time of a global pandemic and an economic crisis the last thing Canadian and American workers need is new tariffs that will raise costs for manufacturers and consumers, impede the free flow of trade, and hurt provincial and state economies.”
She also rejected the president's national security justification for the measure. “Canadian aluminum strengthens U.S. national security and has done so for decades through unparalleled cooperation between our two countries,” she said.
For months, American and Canadian officials have debated whether Canada's rising imports violate that agreement. Imports of Canadian aluminum have risen since the tariffs were lifted last year — although they remain below levels seen within the last few years.
The American aluminum industry recently has struggled to compete with producers in countries like China, Russia, Iceland, the United Arab Emirates and Canada that offer state subsidies or benefit from cheap electricity. Today, only a handful of American aluminum smelters, which make raw aluminum out of bauxite, still operate.
Supporters of the tariffs say that imports from Canada and the economic slump that accompanied the pandemic have once again thrown the industry into disarray. Two American companies, Century Aluminum and Magnitude 7 Metals, have lobbied intensely for the tariffs to be re-imposed although the rest of the aluminum industry, which has operations spread around the globe, including in Canada, has fought against the measure. The multitude of industries that use aluminum to make products including cars, beer cans and washing machines, have also argued against the levies saying they increase costs and make their products less competitive globally. Even Whirlpool, the appliance maker where Trump made his announcement on Thursday, has seen its costs for raw materials rise as a result of the metal levies.
In June, executives from more than 15 of the world's largest aluminum companies, including Alcoa, Constellium and Novelis, wrote to the president arguing against the tariffs.
“Fully 97% of U.S. aluminum industry jobs are in mid-and-downstream production and processing,” the letter said. “These jobs depend on a mix of domestic and imported primary aluminum, including from countries like Canada.”
Jim McGreevy, the chief executive of the Beer Institute, said his group strongly opposed the decision, especially amidst a global pandemic that has reduced overall sales while simultaneously increasing demand for aluminum cans.”
Myron Brilliant, the executive vice president of the U.S. Chamber of Commerce, called the move “a step in the wrong direction” and urged the administration to reconsider.
The administration's metal tariff policy is “totally misguided,” said Jean Simard, the president and chief executive of the Aluminium Association of Canada. “We're still in a COVID-related downturn.”
Simard said that shipments of basic aluminum ingots to the United States from Canada had risen after automakers and other importers of more sophisticated aluminum closed their factories because of the pandemic. But he said that with renewed manufacturing in the United States, the market was rebalancing.
According to Simard's group, exports of basic aluminum ingots from Canada declined 16% in June and fell 40% last month. Currently, according to Simard, the U.S. aluminum production capacity can meet only about one-sixth of the country's consumption of the metal. He also said that the Canadian aluminum industry will push the Canadian government to apply tariffs on American-made products.
So, we will see. The decision to impose duties on imported metals was controversial before and likely will continue to be — and should be watched closely by producers as the season advances, Washington Insider believes.
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