Alcoa criticizes Trump’s 10% aluminum tariffs on Canada
WASHINGTON — Alcoa, the Pittsburgh-based aluminum giant, slammed the Trump administration for re-imposing 10% tariffs on imports of some aluminum products, saying the trade penalties would “cause unnecessary disruption” and “further distort the market” without solving the issue of Chinese aluminum overcapacity.
President Donald Trump announced the tariffs — which had originally been imposed on Canada from March 2018 to May 2019 — during a campaign stop in northwestern Ohio last week to discuss manufacturing jobs. Mr. Trump accused Canada of flooding the United States with its exports.
“Canada was taking advantage of us, as usual,” Mr. Trump said during his speech at a Whirlpool factory. “My administration agreed to lift those tariffs in return for a promise from the Canadian government that its aluminum industry would not flood our country with exports and kill all of our aluminum jobs, which is exactly what they did.”
Canadian officials pledged retaliation, with officials intending to impose tariffs on roughly $2.7 billion worth of U.S. aluminum products. The U.S. tariffs are “unnecessary, unwarranted and entirely unacceptable,” Canadian Deputy Prime Minister Chrystia Freeland stated, and the retaliatory tariffs will affect a “broad and extensive” list of American-produced products.
“In the time of a global pandemic and an economic crisis,” Ms. Freeland said in the statement, “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.”
The situation threatened to reignite trade tensions with the United States’ chief trading partner at a moment of relative calm in the Trump administration’s multi-sided trade wars.
The tariffs come less than six weeks after the effective date of the United StatesMexico-Canada Agreement — the new North American free trade deal that was widely praised by businesses and unions alike. The USMCA passed Congress by overwhelming margins and with support form both parties.
Many trade experts believed the Trump administration would hold off on any escalations, at least until the November presidential election. The COVID-19 pandemic’s hit on the economy was also a likely factor in the administration’s hesitancy to impose more tariffs, experts have said.
That belief has held true. Even as relations with China have deteriorated to historic lows, Mr. Trump has refrained from imposing additional tariffs on Chinese imports. His top trade adviser, Robert Lighthizer, has promised to stick to the terms of the U.S.-China partial trade deal, which in January put a pause on tariffs and opened up more trade between the world’s top two economies.
Yet discontent with purported surges in some aluminum imports from Canada bubbled up this year.
Two American companies with domestic aluminum capacity, Century Aluminum and Magnitude 7 Metals, formed a group called the American Primary Aluminum Association and lobbied intensely for the tariffs to be reimposed.
The U.S. Aluminum Association, a Virginia-based trade organization with about 120 companies, labeled that assertion “the great Canadian aluminum distraction.” Virtually all U.S. aluminum jobs depend on a mix of domestic and imported primary aluminum to meet demand, the group stated on June 9. The group disputed any surge in aluminum imports.
Yet days later, Mr. Lighthizer, the U.S. trade representative, told panels in the House and Senate that he was studying the impact of aluminum imports on U.S. producers. “It’s something we’re genuinely concerned about,” he told the Senate Finance Committee.
The policy is at odds with many free-trade Republicans on that committee, including Sen. Pat Toomey, R-Pa., who has been critical of Mr. Trump’s trade policy.
“It was the steel and aluminum tariffs and trade war with China that began the deceleration of what had been extremely strong growth,” Mr. Toomey told Mr. Lighthizer. “Far more people are in the business of using steel and aluminum to produce things than [there are] people who actually make steel and aluminum.”
How reinstated tariffs will affect Alcoa’s business is a complicated question.
Alcoa, which is spread across the U.S. and Canada, has vocally opposed tariffs, arguing they drive only a limited increase in U.S. production while penalizing essential imports. About 28% of Alcoa’s aluminum is produced in plants in Canada, according to Bloomberg Intelligence data, driving up costs.
But any higher costs from its Canadian businesses could be offset by rising demand and higher prices at its U.S. locations. Even as it opposed tariffs, Alcoa reported they created a net benefit of $27 million in the third quarter of 2018, compared to a scenario with no tariffs.
In a statement provided to the Post-Gazette on Monday, the company declined to speculate on the tariffs’ impact on prices. But it acknowledged that, generally speaking, it would see a net benefit if U.S. prices rise more than the cost of the tariffs.
In April, Alcoa idled a smelter in Ferndale, Wash., saying that production there was “uncompetitive.” Investors may be betting on a tariff-fueled rebound: Alcoa’s stock was up 6% since Mr. Trump’s announcement in midday trading.
But the company made it clear it was “disappointed” by the new tariffs.
“Implementing these tariffs on a vital, free-trading partner will cause unnecessary disruption for downstream producers across North America and further distort the market,” the company stated.
William Oplinger, Alcoa’s executive vice president and chief financial officer, told the Deutsche Bank Global Industrials and Materials Summit in June that tariffs are “an ineffective tool” to pressure China into curtailing production.
The partial trade deal signed in January contained no provisions to reform Chinese steel and aluminum production. Mr. Trump promised those thornier issues would be addressed in a “phase two” deal, which the administration later said would not happen anytime soon.
“Our position is that China’s overcapacity and heavy subsidization of the industry is the real problem,” Mr. Oplinger said. “We’ve not seen an influx of a significant amount of metal from Canada.”