US to Reinstate Canada's Aluminum Tariffs
The U.S. is reinstating its 10% tariffs on raw aluminum imports from Canada beginning Aug. 16 following a proclamation issued by President Donald J. Trump late last week.
Canada, then, announced shortly after that it will impose tariffs on $2.7 billion worth of imports form the U.S. in response.
Aluminum/Steel Tariff History
In March 2018, Trump imposed tariffs to affect steel and aluminum imports from other countries across the globe. The assigned duties were 25% on steel products and 10% on aluminum.
Companies that felt they needed to use steel or aluminum from another country—because that particular product wasn’t made in the U.S., for example—had the opportunity to apply for an exemption.
By June, the U.S. allowed the tariffs to go into effect for Canada, Mexico and the European Union, after months of discussion of possible exemptions. The U.S. Department of Commerce also announced the first round of exemptions, while noting that it would be investigating whether some companies in the market were taking advantage of the duties and raising prices unduly.
In May of the following year, Trump continued work on updating the USMCA, Steel Dynamics CEO Mark Millett went on the record to say he believed a quota system would replace the current tariffs that the steel and aluminum industry were subjected to.
However, some in the aluminum industry were reportedly against the quotas, in fear that they would raise prices on aluminum-dependent goods. That same month, Trump later announced that the U.S. would lift its steel and aluminum tariffs imposed on Canada and Mexico in exchange for a new monitoring and enforcement system that will prevent import surges into the U.S. As a part of the agreement, Mexico and Canada would also lift its retaliatory tariffs on American products.
In July, Trump signed an order that would see the expansion of the use of American-made iron and steel in federal projects. The “Buy American” platform aims to push the domestic content threshold from 50% to 95%.
By December 2019, officials from Canada, Mexico and the United States signed a deal once again. The United States-Mexico-Canada Agreement replaced the North American Free Trade Agreement, and both the U.S. United Steelworkers union and the AFL-CIO labor voiced their approval of the deal.
At the beginning of this year, Trump announced an expansion of tariffs on foreign steel and aluminum, claiming that the existing tariffs were not as successful as he’d hoped in restoring American production.
While imports of steel and aluminum into the United States have declined since the tariffs were established in 2018, imports of products made with the same materials have had a significant increase, according to Trump.
The expansion covered products made of steel and aluminum, such as nails, tacks, staples, cables, certain types of wire, bumpers, and various car and tractor parts, among others.
In Trump’s order for the expansion, he noted that from June 2018 to May 2019, imports of items including steel nails and staples rose 33% and imported aluminum wire and cables were up 152% over the same period.
Under the new program, specific products made of aluminum will be subject to an additional 10% duty and certain steel products will be tacked with a 25% tariff. However, Argentina, Australia, Canada (at the time) and Mexico were exempt from the expanded aluminum tariffs. Those countries, along with Brazil and South Korea, are also exempt from the new steel tariffs.
In the recounting of the events in Trump’s recent proclamation, he says: “The Secretary has now advised me that imports of non-alloyed unwrought aluminum from Canada, which accounted for 59% of total aluminum imports from Canada during June 2019 through May 2020, increased substantially in the 12 months following my decision to exclude, on a long-term basis, Canada from the tariff proclaimed in Proclamation 9704.
“Imports of non-alloyed unwrought aluminum from Canada during June 2019 through May 2020 increased 87% compared to the prior twelve-month period and exceeded the volume of any full calendar year in the previous decade. Moreover, imports of these articles from Canada continue to increase, reaching in June of this year the highest level of any month since I decided to adjust imports of aluminum articles in Proclamation 9704. The increase in imports of these articles from Canada is principally responsible for the 27% increase in total aluminum imports from Canada during June 2019 through May 2020.”
Therefore, Trump concluded “that the measures agreed upon with Canada are not providing an effective alternative means to address the threatened impairment to our national security from imports of aluminum from Canada. Thus, I have determined that it is necessary and appropriate to re-impose the 10% ad valorem tariff proclaimed in Proclamation 9704, as amended, on imports of non-alloyed unwrought aluminum articles from Canada, commensurate with the tariff imposed on such articles imported from most countries.”
“Canadian aluminum does not undermine U.S. national security. Canadian aluminum strengthens U.S. national security and has done so for decades through unparalleled cooperation between our two countries. Canada is a reliable supplier of aluminum for American value-added manufacturers. Aluminum trade between Canada and the U.S. has long been mutually beneficial economically for both countries, making the North American aluminum industry as a whole more competitive around the world.
“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.”
Freeland concluded with the announcement that Canada will impose “dollar-for-dollar” countermeasures.
Reactions to the tariffs are mixed, though the Aluminum Association penned a letter in late June in opposition to any plan to impose tariffs or quotas on aluminum imports from Canada.