US imposes tariffs on Canadian aluminium, negative effects expected on North American value chain

“The U.S. administration should reconsider its actions and provide Canada with a permanent exemption” – Simard

The U.S. administration has announced that Canada’s exemption from the 10 per cent aluminium tariff is lifted as of June 1 and the tariff is now permanent, according to a press release from the Aluminium Association of Canada (AAC).

“This decision by the U.S. administration will have negative impacts on the North American integrated aluminium value chain. The overall price of aluminium will increase, affecting small and medium size businesses both in Canada and the U.S.,” said Jean Simard, President and CEO of the AAC.

The consumers and companies that supply these consumers will suffer when prices go up as a result of these tariffs, ultimately undermining the competitiveness of the entire North American aluminum industry.

“Instead, the U.S. should focus on the real issue at hand, mainly China’s overcapacity,” said Simard.

A 10 per cent tariff applied to Canada’s $5.6 billion USD of primary aluminium exports to the U.S. would increase the costs of the American downstream industry by more than $500 million USD.

According to HARBOR Aluminum, an independent industry analyst, trade taxes could impact between 45,000 and 90,000 direct jobs in the manufacturing sector. It is estimated that every new job created would cost $12.5 million to the U.S. economy.

“Canada is an historic and dependable an ally that has provided the US defense industry with reliable aluminium supply since before World War II. Recently, the U.S. and Canada have been aligned on common threats to North American competitiveness such as illegal transshipment and concerns about subsidized overcapacity,” added Jean Simard.

“Canada recently put in place tough regulatory and border measures aimed at preventing circumvention and transshipment.”

Since March 2018, Canada brought in regulatory changes that will improve Canada Border Services Agency’s (CBSA) ability to identify and stop companies that try to avoid duties, and that will give greater flexibility to CBSA to determine whether prices charged in the exporter’s domestic market is reliable in calculating duties.

Additionally, unions will now gain standing to participate in trade-remedy proceedings and CBSA’s funding has been increased. Finally, a marking regime for aluminium products will be aligned with the United States.

The AAC says it remains committed to the view that the Canada is an essential manufacturing partner for the United States by providing essential aluminium for U.S. manufacturers. The AAC is committed to work with customers in North America to ensure reliable supply of aluminium and mitigate consequences from the trade taxes imposed by the U.S.

The U.S. administration should reconsider its actions and provide Canada with a permanent exemption and rejoin efforts to address overcapacity. The AAC will continue to work towards that end with its European and American counterparts, as well as with the government of Canada and the government of Quebec.