Whackin' Up Tariffs on Aluminum Imports: The Trump Card in U.S. Aluminum Industry
Stakes for American Aluminum Industry Demand Sustained Action Beyond Tariffs
The U.S. is shaking up the aluminum market with Donald Trump's 25% tariff on aluminum imports, including some from Canada. This move stirs the pot for ongoing trade squabbles that continue to lurk in the industry shadows. Aluminum, a vital material for sectors like automotive and infrastructure, is sparking hot debates over tariffs, supply chains, and domestic production - with Trump's trade strategy igniting a long-lasting impact.
The spotlight we've laid on the aluminum industry is well-deserved, but the real game-changer isn't only tariffs - it’s all about the juice.
Let's delve a bit deeper. The American aluminum industry mainly deals with recycled aluminum, leaving primary aluminum (the stuff made from raw ore) on the sideline. This primary aluminum is indispensable - from crafting cars, beverage cans, electronics, appliances, and whatnot.
So, here's the deal:
- Canada supplies approximately 60% of the primary aluminum used by the U.S.
- Canada also supplies 58% of all aluminum imports into the U.S.
- The U.S. domestic primary aluminum industry ain't got it in them to meet demand, making Canadian and other imports a lifesaver.
Opinions among aluminum industry producers about tariffs are as diverse as a box of Skittles, but we know that the outcome will be higher costs for things like beer and soda cans, cars, and electronics. Some argue that these higher prices will shift folks to buy locally, while others say it'll turn consumers away from aluminum altogether.
We've been here before. During the Trump administration, section 232 tariffs were slapped on aluminum in 2018. The tariffs were said to help the industry, but they failed to stop the slide.
Back in 2018, the U.S. had seven primary aluminum smelters. In the years following, three have bailed out or curtailed operations - Alcoa's Intalco smelter in Washington in 2020, Century's Hawesville facility in Kentucky in 2022, and Magnitude 7 Metals facility in Missouri in 2024. Today, only four remain, stationed in Kentucky, Indiana, South Carolina, and New York.
So, how do we reignite the U.S. aluminum industry? It ain't about tariffs - it's all about the power, baby!
Primary aluminum production consumes a boatload of electricity, and for a primary aluminum producer, electricity costs make up 40% of their overall costs. electricity. Currently, U.S.-produced primary aluminum mainly relies on high-carbon energy sources such as coal and natural gas, while Canadian aluminum boasts zero-emission hydroelectric power - making it greener and wallet-friendly. Manufacturers are crying out for a domestic supply of low-carbon primary aluminum, and this demand will only grow with the new tariffs.
Governments worldwide support producers by ensuring access to affordable, stable electricity. In the U.S., our reliance on volatile electricity markets and expensive fossil fuels leaves our domestic industry in a lurch.
If our government wants to give a boost to domestic aluminum production, they should focus on energy solutions rather than tariffs that raise costs for consumers and businesses. It's time to flip the switch!
- The Canadian tariff-free access to zero-emission hydroelectric power has been a significant advantage for their primary aluminum production, making it more attractive compared to the higher-cost US primary aluminum production largely relying on fossil fuels.
- The Hawesville facility in Kentucky, one of the US primary aluminum producers, ceased operations in 2022, leaving only four such facilities in operation in the US today, further highlighting the difficulty the domestic industry faces in meeting demand without affordable, sustainable energy sources.
- A shift towards focusing on energy solutions to reduce costs for primary aluminum production in the US could potentially revitalize the domestic industry, as affordable and stable electricity sources would make US-produced primary aluminum more competitive on a global scale, aligning with the surge in demand drove by the 25% tariff on aluminum imports.
