E Pluribus Aluminum?

On August 6, President Donald Trump announced that the 10% tariff on aluminum products, used against Canada as leverage during last year’s negotiations, would be re-imposed on Canadian imports. Canada responded with a pending retaliatory 10% tariff against a range of imports of aluminum and aluminum-containing products from the United States, scheduled to take effect on September 16. As the United States-Mexico-Canada Agreement (USMCA) came into force on July 1, the reopening of the aluminum trade dispute between the two countries raises questions about the substance of the relationship and North American future competitiveness. The aluminum industry has already felt a shift under the USMCA: 70% of aluminum purchased by North American automakers must be produced in North America. What considerations should Canadian aluminum exporters examine as they determine what’s best for their business? Join our discussion with key experts who will look beyond how these tariffs will hurt consumers and workers in the United States and Canada but also provide solutions on how business and government navigate the new tariffs.

Further Reading 

• Jon Johnson – Section 232 Aluminum Tariffs: Classic Bait and Switch

Selected Quotes

Jon Johnson, Senior Fellow, C.D. Howe Institute

(18:23-18:43) “Where does [tariff] retaliation go? You can argue under the joint statement we’re [Canada is] entitled to do this. We probably are. Unless the U.S. further retaliates and then we further retaliate,  we’re into the downward spiral that you have when you have any of these trade wars, and it really gets nobody anywhere.”

(19:02-19:57) “Canada exports more aluminum products to the U.S. than does U.S. to Canada. However, there’s a reason for this … Aluminum production requires massive amounts of economically priced electricity…Many [U.S. jurisdictions] rely on coal… Quebec and [British Columbia] rely exclusively on hydropower which is constant and clean, so again there’s a significant production advantage and economic advantage to producing aluminum in Canada.”

(23:46-24:32) “One of the incredibly aggravating things is that the CUSMA rules of origin have an aluminum purchase requirement … [I]t allows section 232 tariffs on Canadian aluminum to put a penalty on U.S. auto producers who are using Canada as a source of this particular aluminum product, which again is an important one. That, I think, is just incredibly aggravating. It strikes me as being a purely protectionist measure, and it certainly undermines any credibility that any of this has to do with national security.”

(24:40-25:33) “I guess it’s fairly clear to people in Canada that if Trump gets back in this situation and these tariffs will simply continue. Now if Biden wins, it’s a different matter … I think one of the key things, however, that a new U.S. administration will want to do is mend fences with trade partners, with allies like Canada. This is, I think, an extremely important fence to mend. So there may be some hope there. This is a rather gloomy picture that I’ve painted, but unfortunately I think that is the situation as we see it.”

Christine McDaniel, Senior Research Fellow, Mercatus Center, George Mason University

(29:41-30:14) “The way the [tariff exclusion] process has been set up is, it really gives a lot of leverage to the producers, steel and aluminum producers, and very little to the manufacturers that are trying to get the exclusion. Filing an objection is nearly costless for a producer but has real consequences for the importer, you know, for the manufacturer.”

(30:56-31:13) “This is within Commerce’s purview to modify the system, to minimize these excessive objection filings, right, because what we’ve found is that producers have been objecting to unrealistic quantities [of steel and aluminum].”

(31:21-31:47) “The fact that these objections are unrealistic, and they’re so consequential, they lead to delays, it does raise concerns on the ability of the Tariff Exclusion process to achieve its original goal, which was to minimize undue impact on downstream industries. We’ve seen that in steel, and we’ve seen that in aluminum.”

(55:48-56:29) “We have to keep in mind though that the market has its ups and downs, and if you’re going to start to, you know, if you want to regulate what people can buy and sell from each other within a very narrow window, narrow range, that is regulated trade. That’s overregulation, that’s managed trade, and that is not the American way. That’s not the spirit of economic freedom in this country, and that’s not the way that our founding fathers envisioned things when they set up the GATT and the principles of the WTO and that is not going to be the way forward to economic growth in this country.”

Dan Ujczo, Practice Group Chair, Canada-U.S, Dickinson Wright

(5:21-5:57) “We cannot lose sight of the fact that Canada-U.S. is the best trading relationship around. And the tide comes in every day and it comes out … this relationship works, and there’s no better evidence of that than right now: we’re in the middle of a pandemic and trade is flowing across our borders.”

(6:40-7:16) “I’m working with companies every day and we’re finding a lot of good news in this trade agreement [USMCA], and if we use it, this will actually position North America for a stronger recovery as we come out of COVID-19 … just because we don’t like who’s in the Oval Office or who’s in the Prime Minister’s Office, it doesn’t mean we give up on this relationship.”

(12:02-13:26) “No data is going to fix this, and no dramatics [either].We need a deal [on Canada-U.S. tariffs], and the deal needs to be between industry to figure out what we can do to fix this problem … if I was targeting anybody on that deal, yes big business should be out there about raising the costs, but you have to get in front of labor and those other organizations that have the eyes and ears of both the Trump White House and democrats because if you’re not talking to those folks, you might as well save your breath.”

(12:26-13:03) “We’re in the political season…[removing tariffs] is going to be a huge lift because nobody on the ground is making their decisions [on that] right now. They agree with Canada’s position, but they’re not making their political decisions for the average voter on that decision. If this continues, it’s going to continue past the election, into the lame duck, maybe into the new administration, whatever side that is."