In an interview with Fox and Friends, U.S. Senator Chuck Grassley (R, Iowa) discusses the path to what he terms a major trade victory for the U.S. In order for this to happen, he believes removing the Sec. 232 tariffs from the USMCA, the new and yet-to-be-ratified U.S.-Mexico-Canada trade deal to replace NAFTA struck in November 2018, would be critical.
Followers of ARPN will know that in recent months, we have been keeping tabs on this issue, because it revolves around metal that sits at the intersection of trade and resource policy — Aluminum – one of the five Gateway Metals we have featured on our blog as part of our “Through the Gateway” campaign.
Watch the clip here:
Why does it matter?
Included in the 2018 list of 35 minerals deemed critical to the United States national security and economy, aluminum is the No. 1 material by annual DoD usage, and “a shortage of aluminum metal was cited in a nonclassified defense study as having ‘already caused some kind of significant weapon system production delay for DoD.’”
While the U.S. is home to significant deposits of bauxite, from which aluminum is sourced, we import a significant percentage of the aluminum consumed domestically.
As we previously pointed out, “[u]nlike with other metals and minerals, however, this represents a marked decrease in geopolitical risk, as most of our aluminum imports are sourced from one of our closest trading partners, Canada, which accounted for 56% of total aluminum imports from 2013-2016.
While viewed in isolation and from the upstream end of the supply chain at the minesite, the U.S. is increasingly import-dependent for the aluminum it needs, but viewed in the context of an integrated North American supply chain between the United States and Canada, our neighbor to the North is helping the U.S. close a significant domestic production shortfall.”
Thus, many were startled by the Administration’s decision earlier last year to impose trade tariffs on Canadian-made aluminum and steel under Section 232 of the 1962 Trade Expansion Act.
The USMCA had opened a window to drop these tariffs on steel and aluminum imports from Canada and Mexico, which stand in the way of a fully integrated North American defense supply chain and, particularly with regards to Canada, “ignore nearly 80 years of deep defense cooperation with our northern neighbor.”
However, against all hopes, the tariffs have remained intact and all attempts to convince the Administration to strip the provisions have failed to date – which is why Sen. Grassley’s effort to help strip them from the agreement are all the more important.
As ARPN’s Dan McGroarty pointed out in his piece for The Hill:
“Particularly in the case of Canada, the U.S. tariffs ignore nearly 80 years of deep defense cooperation with our northern neighbor: Aluminum produced in Canadian smelters was central to the Allied war effort throughout World War II, during which the massive plant at Saguenay, Quebec supplied more than 40 percent of the Allies’ overall aluminum production. Today, Saguenay aluminum is on the U.S. tariff list.
With agreement on USMCA, it’s time to reaffirm the importance of an integrated U.S.-Canadian Defense Industrial Base. As the Government of Canada’s official comments on the 232 inquiry noted, ‘open aluminum trade with Canada benefits the U.S. economy and its national security.’ With aluminum on the U.S. Critical Minerals List, with the U.S. producing only 39 percent of the aluminum it uses each year and Russia and China among our leading suppliers, it makes no sense to slap a 10 percent aluminum tariff on Canada.”