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US to re-impose tariffs on Canadian aluminum imports

US producer Alcoa’s smelter in Canada. (Image courtesy of Alcoa Canada)

The Trump administration is set to re-impose tariffs on aluminum imports from Canada next week, a move that is likely to cause a political uproar and an economic fallout for the maple leaf country.

If Canada declines to impose export restrictions, Bloomberg reported, the United States will re-instate a 10%-tariff on aluminum from Canada.

The US is the main export destination for Canada’s $13-billion aluminum industry, accounting for 83% of its trade in 2018

It would happen on July 1, which is when a long-negotiated new trade agreement among the US, Mexico and Canada (USMCA) is also set to take effect.

The US is the primary export destination for Canada’s $13-billion aluminum industry, accounting for 83% of its trade in 2018.

Futures prices for the metal on the Chicago Mercantile Market have climbed in recent weeks. Some analysts attribute the trend to behind-the-scenes lobbying efforts by two American aluminum companies, pressure from other aluminum producing countries, and the likelihood of President Donald Trump imposing fresh restrictions on Canadian imports.

The only three US aluminum producers — Alcoa, Century Aluminum and Magnitude 7 Metals — have different opinions about re-imposing tariffs to Canadian aluminum.

The American Primary Aluminum Association, which represents Century Aluminum and Magnitude 7 Metals has insisted the measure is necessary.

The Aluminum Association of the US, which represents Alcoa, Rio Tinto and a number of other aluminum parts makers, says fresh tariffs are uncalled for. They argue imports have remained practically unchanged since 2017.

Natural partnership

Canada’s aluminum sector has been closely integrated with the US for decades as part of the wider North American Free Trade Agreement (NAFTA).

Cheap hydroelectric power in Quebec and British Columbia has contributed to making Canada a natural location for energy intensive smelters. These facilities produce aluminum that can be further refined, or shipped to the US for the manufacturing of goods —from spare parts for cars to soda cans.

That ended in 2018, with the US government announcing it was slapping 10% tariffs on almost all aluminum imports, including from Canada.

In May this year, Trump announced there would be no more tariffs on Canadian aluminum exports. The move came shortly after he increased tariffs on derivative steel products by an additional 25% and on derivative aluminum products by an additional 10%. Canada and Mexico were exempted.