News headlines these days are full of doom and gloom. As the Guardian writes, “whether or not the world really is getting worse, the nature of news will interact with the nature of cognition to make us think that it is.”
Against this backdrop, it’s nice to see a little – albeit cautious – optimism spread around here and there. In this particular case, it’s coming via our neighbors to the North. According to the Canadian Government, officials are hopeful that the so-called Section 232 tariffs on aluminum and steel imposed by the Trump administration last year, which were in turn followed by retaliatory tariffs by Canada, are on the way out.
While government representatives have been cautioning that Canadian ratification of the USMCA, the new U.S.-Mexico-Canada trade deal to replace NAFTA struck in 2018 might be delayed if the “the situation with respect to steel and aluminum is not yet resolved,” David McNaughton, Canada’s ambassador to the United States, has expressed optimism that “we’ll get there in the next few weeks.”
As a Mercatus Center study showed late last year, the tariffs “appear to have been far more destructive to domestic industry than the administration anticipated.”
As a result, more than 45 groups representing a wide range of business sectors renewed their call for an end on the Section 232 tariffs in 2019 in a coalition letter sent to U.S. Secretary of Commerce Wilbur Ross and U.S. Trade Representative Robert Lighthizer in January, arguing that
“for many farmers, ranchers and manufacturers, the damage from the reciprocal trade actions in the steel dispute far outweighs any benefit that may accrue to them from the USMCA. The continued application of metal tariffs means ongoing economic hardship for U.S. companies that depend on imported steel and aluminum, but that are not exempted from these tariffs. Producers of agricultural and manufactured products that are highly dependent on the Canadian and Mexican markets are also suffering serious financial losses.”
Both from an economic and national security perspective, doing away with the tariffs would be beneficial to all parties involved. Followers of ARPN will recall last year’s Defense Industrial Base Report listing nearly 300 weak links in the U.S. defense supply chain and stating that “a key finding of this report is that China represents a significant and growing risk to the supply of materials deemed strategic and critical to U.S. national security.” This includes Aluminum.
When 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 — and Canada, in the context of a long-standing integrated North American supply chain, has long been instrumental in helping the U.S. close the significant domestic production shortfall.
As ARPN’s Dan McGroarty has pointed out in a 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.”
Here’s hoping the Canadian government’s optimism is not misplaced.
