While specialty and tech metals like the Rare Earths and Lithium continue to dominate the news cycles, there is a mainstay metal that has – for good reason – been making headlines as well: Aluminum.
Bloomberg recently even argued that “Aluminum Is the Market to Watch Closely in 2019.”
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.’”
The U.S. is home to significant bauxite deposits, from which aluminum is sourced, but we import a significant percentage of the aluminum consumed domestically. Unlike 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.
Followers of ARPN may recall that the USMCA, the new U.S.-Mexico-Canada trade deal to replace NAFTA struck in November 2018, 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.”
Unfortunately, the provision remained intact in the November agreement, prompting more than 45 groups representing a wide range of business sectors to renew 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 last week, the signatories argue 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.”
Meanwhile, on Capitol Hill, a bipartisan group of lawmakers are preparing draft legislation to strip the Administration of the tool it used to impose the above-referenced tariffs, which it is considering to use to implement further duties on car and car part imports.
According to Politico, the Bicameral Congressional Trade Authority Act, the draft bill’s working title, would strip the president of the unilateral power to “make a final determination on whether to levy import restrictions if a Commerce Department analysis determines that foreign imports are undermining U.S. economic interests in a way that poses a threat to national security,” by requiring congressional approval of any such tariffs proposed under Section 232. If passed, the legislation would also require a retroactive vote to approve any tariffs imposed under Section 232 within the last four years — including the ones on aluminum and steel the USMCA negotiators failed to strike.
With the tariffs removed, the November USMCA agreement could well become a “springboard to take the strategic North American alliance to a new level.”
Here’s hoping Washington will not fail America.
