Trump Administration Moves to Drop Tariffs on Canadian Aluminum

Date: Wednesday, September 16, 2020
Source: Wall Street Journal

The Trump administration moved on Tuesday to drop tariffs, reimposed just last month, on Canadian aluminum, a swift reversal of a policy that had drawn widespread criticism from U.S. businesses and had dented U.S.-Canada relations.

The Office of the U.S. Trade Representative said it held consultations with the Canadian government, and now expects that imports of the type of aluminum subject to the 10% tariffs is likely to decline in coming months after surging earlier in the year. As long as aluminum imports decline as expected, the USTR said the tariffs won’t apply.

The decision from USTR came hours after Canadian Prime Minister Justin Trudeau said his government was set to unveil its final list of U.S.-made goods that the country would target with countertariffs.The countertariffs, in retaliation for the Trump administration’s aluminum levy, were set to kick in Wednesday, or 30 days after the U.S. levies. Canada was considering tariffs on U.S.-made goods that contained aluminum, such as washing machines and golf clubs.

“This was a day where common sense prevailed,” Chrystia Freeland, Canada’s Deputy Prime Minister, said at a press conference. “In terms of what happens going forward, we have been clear to USTR: Were tariffs to be imposed in the future on aluminum, we will reciprocate with dollar-for-dollar retaliation.”

She added the Trump administration moved unilaterally, and there was no agreement between the two trading partners.

Tariffs on Canadian aluminum and steel were first imposed in 2018, with the U.S. saying that import of the metals threatened U.S. national security. The tariffs were then dropped during negotiations over a new U.S.-Mexico-Canada Agreement in 2019. A little over a month after implementation of the new trade deal began, the Trump administration reimposed the tariffs but only on aluminum, not steel. Mr. Trump announced the tariffs at a speech at a Whirlpool factory in Clyde, Ohio, saying that “Canada was taking advantage of us, as usual.”

Major business groups, including the Chamber of Commerce; the American Automotive Policy Council, which represents the big-three auto makers, and the Beer Institute, criticized the president’s decision to reopen a trade fight with a traditional close economic ally, so soon after a new trade agreement had gone into effect. The tariffs were also opposed by the Aluminum Association, which represents most of the aluminum industry, including many U.S.-based users of aluminum who are hurt by the increased cost of the tariffs.

“Removing these disruptive and unnecessary tariffs on Canadian aluminum was the right decision for the U.S. aluminum industry,” said Tom Dobbins, chief executive of the Aluminum Association. “It is vital that we keep North American aluminum supply chains open and unencumbered.”

At the heart of the dispute was the two ways of looking at aluminum imports from Canada. The U.S. imports aluminum that is classified into two primary types: raw aluminum without any added alloys and aluminum that contains the alloys. The latest round of tariffs applied only to the unalloyed aluminum.

Over the past year, total U.S. imports of Canadian aluminum had been little changed at about $200 million a month. But there was a significant shift in the types of aluminum coming into the U.S. Imports of unalloyed aluminum have climbed rapidly, while alloyed aluminum has dropped. In justifying the tariffs, the U.S. pointed to the surge in unalloyed aluminum.

The Aluminum Association in the U.S. said the data had been cherry-picked to make the case for a surge.The tariffs had little support aside from Century Aluminum Co., a U.S. producer of aluminum that has become the leading advocate for aluminum tariffs in recent years.

The reversal on aluminum tariffs might reflect U.S. electoral politics and the fear of fallout from Canada’s retaliation, said one U.S.-Canada trade watcher. The Trump administration “was likely worried about seeing anything that might complicate the economic and political situation in states it needs to win to get re-elected,” said Eric Miller, head of Washington-based Rideau Potomac Strategy Group and a former senior Canadian official.

The U.S. said it would monitor aluminum imports over the rest of the year, and will consult with Canada at the end of the year to “review the state of the aluminum trade in light of trade patterns during the four-month period and expected market conditions in 2021.”

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