The US and Canadian aluminum industries are expressing strong opposition to the recent imposition of tariffs between the two countries. These tariffs have been criticized for disrupting the integrated North American aluminum supply chain, which has been developed over decades. Industry groups from both nations argue that these measures are counterproductive and distract from the larger issue of heavily subsidized aluminum flowing from China into the global market.
The new tariffs, which came into effect after a breakdown in trade talks, include 50 percent duties on approximately $20 billion worth of Canadian goods imposed by the US, followed by Canada's dollar-for-dollar retaliation on US exports, also totaling about $20 billion. These retaliatory measures from Canada, set to begin on September 8, include increased duties on US steel and aluminum, as well as new tariffs on American milk, furniture, clothing, video game consoles, and smartphones. This escalation marks a significant deterioration in trade relations, with each side blaming the other for the impasse.
The collapse of trade talks occurred despite earlier reports of a tentative deal that would have seen the US reduce tariffs on Canadian steel and aluminum to 25 percent and on auto exports to 15 percent. However, negotiations faltered over issues like tariffs on downstream aluminum products, with the US seeking to maintain 50 percent tariffs on these goods while Canada refused. The US views these tariffs as national security measures and aims to protect American jobs in aluminum fabrication, which account for a significant portion of US aluminum employment.
Critics of the proposed deal, such as the Coalition For A Prosperous America, argued that lowering tariffs on finished Canadian aluminum goods would create a 'tariff inversion,' disadvantaging US extruders due to higher metal costs from existing tariffs on billet. They also expressed concerns about Canada serving as a 'back door' for Chinese metal into the US market, citing increasing Chinese steel imports into Canada and alleged transshipment issues. The US had sought stricter measures from Canada to prevent the influx of Chinese metals, including price tests and mirrored restrictions on Chinese metal.
Ultimately, the failure to reach an agreement and the subsequent imposition of tariffs have led to a more acrimonious trade relationship. Both sides are engaging in new lobbying campaigns as sectors like aluminum, dairy, lumber, and automobiles face uncertainty. The US administration is reportedly considering further trade penalties against Canada following the latter's retaliatory measures.
