Trump's New Tariffs on Canadian Aluminum Are Indefensible
One month after signing a signature trade deal with Canada (and Mexico), Trump just launched an unnecessary and counterproductive new trade war against America's northern neighbor.
When President Donald Trump imposed 10 percent tariffs on imported aluminum in March 2018, it was (predictably) American aluminum-consuming companies that suffered the most.
Companies like Whirlpool Corp., for example. The appliance manufacturer—which had previously been a cheerleader for Trump's tariffs on imported washing machines—saw its sales and stock prices tumble in the months after Trump's aluminum tariffs took effect, as the import taxes added to the company's input costs. It takes a lot of aluminum to build a washing machine, after all.
That background is essential to understanding the weirdness that unfolded on Thursday evening when Trump announced—from the factory floor at a Whirlpool manufacturing plant in Ohio—that he was reimposing 10 percent tariffs on aluminum imported from Canada.
Those tariffs had been lifted in 2019 as Trump sought to negotiate the United States–Mexico–Canada Agreement (USMCA), which officially took effect last month. But with the new trade deal in place, Trump has quickly returned to his old tricks. "Canada was taking advantage of us, as usual," he said Thursday during a largely off-the-cuff speech at the plant. The new tariffs are slated to take effect on August 16.
Ostensibly, the justification for reimposing these tariffs is the claim that imports have increased dramatically in recent months. In reality, that's a bunch of nonsense. The Aluminium Association says the claims of a surge in aluminum imports "are grossly exaggerated." In fact, aluminum imports from Canada are below 2017 levels—the last year before Trump's first round of tariffs took effect.
And even if aluminum imports were increasing, that's not something to get upset about. The United States literally does not produce enough aluminum to meet its domestic needs, so imports are essential for supporting the 97 percent of American aluminum industry jobs that are in downstream production. And when more aluminum—or anything else—is traded back and forth between the United States and Canada, both countries benefit from the transaction. That's how trade works.
It's not exactly clear what Trump hopes the reinstated tariffs will accomplish, but the one thing that should be obvious is that American aluminum-consuming industries will once again be punished by the president's trade policies. The tariffs "will place greater financial hardship on U.S. vehicle parts manufacturers at a time when the industry is trying to recover from plant shutdowns and a declining economy," said Bill Long, president and CEO of the Motor and Equipment Manufacturers Association, in a statement issued Thursday.
In deciding to reimpose tariffs on Canadian aluminum, the Trump administration "failed to listen to the vast majority of domestic aluminum companies and users," said Tom Dobbins, president & CEO of the Aluminum Association, in a statement yesterday. And that's the reaction from the industry that Trump's measure is supposed to be helping.
In February, the heads of 15 of the world's largest aluminum companies sent a letter to the White House urging the president to resist calls for renewed tariffs on Canadian aluminum—an effort that came from just two companies, The New York Times reported at the time.
"The few companies that stand to benefit from reinstated 232 tariffs on aluminum have cherry-picked government data and omitted important context to build their case, which unfortunately won the day," said Dobbins.
Politically, tariffs on Canada don't make much sense either. At the very least, Thursday's announcement undermines one of Trump's biggest accomplishments on the trade front: the USMCA. Canadian Prime Minister Justin Trudeau announced on Twitter that his government would immediately retaliate.
In response to the American tariffs announced today, Canada will impose countermeasures that will include dollar-for-dollar retaliatory tariffs. We will always stand up for our aluminum workers. We did so in 2018 and we will stand up for them again now. https://t.co/gYH0ziOVM4
— Justin Trudeau (@JustinTrudeau) August 6, 2020
More generally, the abrupt turn against a close ally and major trading partner with whom the U.S. had just signed a major trade deal signals to the rest of the world that Trump's deals aren't to be trusted.
"If the U.S. walks back on its trade commitments, how can it criticize China for doing the same?" The Wall Street Journal editorial board opined today. "The aluminum tariff is Mr. Trump at his policy worst: He hurts U.S. industry and consumers, while telling America's friends that his word on trade can't be trusted."
Indeed, it's difficult to find any logical explanation for why Trump would pursue a policy that will increase costs for American consumers and businesses in the middle of a major economic downturn.
"These tariffs will raise costs for American manufacturers, are opposed by most U.S. aluminum producers and will draw retaliation against U.S. exports—just as they did before," said Myron Brilliant, vice president and head of international affairs for the U.S. Chamber of Commerce, in a statement that sums up the bizarre and counterproductive déjà vu of Thursday's announcement.
Is it tone-deafness? Is it willful ignorance? Maybe a little of both, mixed with the fact that Trump is a one-trick pony who still believes—despite a two-year-long real-world experiment showing otherwise—that tariffs will fix America's economic ailments.
That he would announce this new policy while literally standing on the factory floor of a business that the policy will materially harm is the cherry on top of this nonsensical milkshake. It also might be the most perfectly apt metaphor for Trump's inept and incoherent trade policy: one that he thinks is helping American manufacturing while it actually does the exact opposite.
