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Trump to Reimpose Aluminum Tariffs on Canada -- 2nd Update

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08/06/2020 | 09:45pm EDT

By Josh Zumbrun

President Trump placed tariffs on some Canadian aluminum Thursday, a little over a month after implementing the new U.S.-Mexico-Canada Agreement designed to lower trade barriers across North America.

The White House said certain types of aluminum were surging into the U.S., depressing the U.S. industry. The administration justified the tariffs, which will be set at 10%, using a national security provision and argued that a depressed U.S. aluminum industry threatens U.S. national security.

"Earlier today I signed a proclamation that defends American industry by reimposing aluminum tariffs on Canada," President Trump said during a speech at a Whirlpool factory in Clyde, Ohio. "Canada was taking advantage of us, as usual," he said. "The aluminum business was being decimated by Canada, very unfair to our jobs and our great aluminum workers."

Canada's deputy prime minister, Chrystia Freeland, who was a key negotiator in the recent trade agreement, responded Thursday, saying the tariffs were "unwarranted and unacceptable."

"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 said, and vowed that Canada would retaliate with proportional tariffs on U.S. exports to Canada.

Major business groups, including the Chamber of Commerce, the American Automotive Policy Council, which represents the big-three auto makers, and the Beer Institute, criticized the president's decision to reopen a trade fight with a traditional close economic ally. They say the tariffs violate the spirit of the free trade agreements. Because of their national security justification, however, such tariffs don't legally violate trade agreements.

"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," said Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce. "We urge the administration to reconsider this move."

Jim McGreevy, the president of the Beer Institute, which represents American brewers, said the tariffs were a mistake:

"The United States imports more primary aluminum from Canada than from any other country, making Canada a key player in many American manufacturing processes, including the beer supply chain," Mr. McGreevy said, adding that the beverage industry alone had paid $582 million in tariffs since they first took effect in 2018. "We strongly oppose the decision to re-implement aluminum tariffs on one of our nation's most important allies."

Most of the aluminum industry opposes the tariffs on allies like Canada, and says that China is behind problematic trade practices in the aluminum industry. China has long been faulted for subsidizing its own aluminum makers, which drives down global aluminum prices.

Alcoa, the largest U.S. aluminum producer, which also operates smelters in Canada, said "implementing these tariffs on a vital, free-trading partner will cause unnecessary disruption...tariffs don't address the issue of Chinese overcapacity, which is the fundamental issue challenging primary aluminum production."

Century Aluminum Co., a U.S. producer of aluminum that has become the leading aluminum advocate for tariffs in recent years, supported the administration's decision.

"President Trump's action demonstrates this administration's continued dedication to restoring the U.S. aluminum industry and American jobs," the company said.

In a formal proclamation of the tariffs, the White House said the tariffs would apply only to a certain category of aluminum -- non-alloyed unwrought aluminum, which refers to unfinished ingots and slabs of aluminum that are then heated and rolled into different products like sheet or shapes of aluminum.

The White House said that imports exceeded the volume of any full calendar year in the previous decade.

Some in the industry disputed the White House characterization.

"There is no surge" in imports of Canadian aluminum, said Jean Simard, chief executive of the Aluminum Association of Canada, adding some month-over-month anomalies can be attributed to changes in production caused by the pandemic. "This U.S. focus on Canada only distracts from the real problem facing the aluminum industry: unfairly subsidized Chinese aluminum production leading to global overcapacity."

Canada is the fourth-largest aluminum producer in the world, and the metal is sold to the U.S. for use in defense production, automotive assembly and beer cans. Mr. Miller said the fresh tariffs will raise prices, and "it is another example of this administration needlessly poking an important ally in the eye over a product the U.S. needs from Canada."

The question remains how the Canadian government will retaliate, he said. Though Canada said it would impose tariffs matching the aluminum tariffs in size, it has not specified what products would be affected by retaliation. Previously, Canadian authorities imposed tariffs on goods produced in states that either senior members of Congress hail from or are swing states in the coming election.

The Trump administration first imposed tariffs on steel and aluminum in March of 2018, arguing that imports of steel and aluminum threatened U.S. national security. The tariffs ultimately went into effect for steel and aluminum imports from nearly every country in the world.

The tariffs emerged as a significant source of tension between the U.S. and Canada as they worked to renegotiate the 25-year-old North American Free Trade Agreement. The tariffs had supporters in the steel industry, but were opposed by most of the aluminum industry, and by companies that use metals. The Canadian government argued that because of its longstanding alliance with the U.S., imports of Canadian metals weren't a threat to U.S. national security.

In May of 2019, the U.S. agreed to drop the tariffs after Republican lawmakers told the White House that the new trade agreement would die in Congress if the tariffs weren't removed.

Thursday's announcement only pertained to aluminum from Canada, not the 25% tariff on steel.

The issue re-emerged earlier this summer when Mr. Trump's top trade negotiator Robert Lighthizer told Congress in June that he was concerned by an increase of aluminum imports from Canada. The Aluminum Association sent a letter to Mr. Lighthizer, signed by 15 CEOs and senior executives across the U.S. aluminum industry, urging the administration not to reimpose tariffs.

"After all of the hard work that has gone into making the USMCA a reality, it would be a shame to move backward by reapplying tariffs or quotas on aluminum," Tom Dobbins, the Aluminum Association's president, said at the time.

In 2019, the U.S. imported about $5.8 billion of bauxite and aluminum from Canada, down from as much as $7 billion in 2017.

--Paul Vieira, Bob Tita, Alex Leary and Austen Hufford contributed to this article.

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
ALCOA CORPORATION 0.43% 12.9498 Delayed Quote.-40.49%
CENTURY ALUMINUM COMPANY -0.32% 7.75 Delayed Quote.2.79%
WHIRLPOOL 0.24% 201.3 Delayed Quote.35.52%
WHIRLPOOL S.A. 0.72% 7 End-of-day quote.-31.71%
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