Years of complex negotiations by industry and government leaders finally paid off last week with the entry into force of the United States-Mexico-Canada Agreement. But what should be a significant victory for all three countries now faces a dark cloud of uncertainty: The U.S. is threatening to reinstate Section 232 aluminum tariffs on Canada just days after the USMCA enters into force.
This move is illogical and unsettling to all of us who have worked so hard to get this far. The tariffs could trigger a new trade war with our second-largest trading partner, undermining the benefits of this important agreement at a time when U.S. businesses and consumers can least afford it. After all the progress that’s been made with Canada, after all the work that’s been done on the USMCA, the last thing anyone needs is an unforced error to undo it all.
Inexplicably, the reinstated tariffs would target only Canada and only aluminum — not steel, not agriculture, and certainly not nonmarket economies. This demonstrates that this threat is really just the product of good lobbying by self-interested players, not good policy. Only two primary aluminum companies that don’t use any Canadian aluminum stand to benefit. The rest of the U.S. aluminum industry would suffer, and the rest of the economy would suffer with it.
Over the past two weeks, I’ve heard from end users of aluminum in industries ranging from aerospace to automotive to beverages to electronics, who are concerned at the thought of a Groundhog Day revival of the trade war with our second-largest trading partner. It would be a kick to the gut while they’re already down in a struggling economy.
After President Trump wisely granted a section 232 exemption to Canadian aluminum last year, the U.S. trade representative held out the potential for tariffs if there were a “surge” in imports — a term that was never defined. The U.S. trade representative is attempting to make the case that such a surge is taking place now, even though it’s clear, based on current market dynamics, that there has not been a marked increase in aluminum imports from Canada. The few who stand to benefit from tariffs have cherry-picked government data and omitted important context to build their case.
If the tariffs become a reality, the market blowback could be substantial and will affect numerous industries. Canada will almost certainly retaliate, and quite possibly on industries outside of the scope of the 2019 aluminum tariff exemption deal.
One casualty will be industries involved in supporting the heroes who are on the front lines of the COVID-19 response. Aluminum was deemed a critical sector during the shutdown for its wide use in lifesaving medical equipment, building material for emergency facilities, and packaging for food, beverage, and hygiene products. The departments of Commerce and Defense both recognized aluminum as “vital to national security, especially in an unexpected or extended conflict or national emergency.” Is this really the time to drive up prices for hospitals on everything from IV stands to anti-microbial equipment?
The tariff would also undercut economic stimulus actions to provide aid and support for the 20 million unemployed and the millions more who are struggling. Aluminum is in everything from cars to airplanes to beverage cans to the wiring in our cellphones. When its costs rise, we all feel it.
Trump was wise to grant Canada an exemption from the Section 232 tariffs last year. It had an overwhelmingly positive impact on the U.S. aluminum industry and the 690,000 jobs it supports. We encourage Trump to step in and end this new trade war before it begins so that he can get on with highlighting the USMCA as the historic victory that it is.
Tom Dobbins is president and CEO of the Aluminum Association.
