US aluminum tariffs achieved goal in saving, growing domestic industry: panel

The US' 10% tariff on aluminum imports from most countries accomplished its stated purpose of protecting the at-risk domestic aluminum industry in the interest of national security, market analysts and participants said May 26 after the release of a report from the Economic Policy Institute.

EPI Senior Economist Robert Scott said the tariff, imposed by former President Donald Trump under Section 232 in 2018, came at a time when the US primary aluminum industry was "hanging on by a thread."

"The industry was threatened with collapse, and the US had the only existing high-quality, high-purity aluminum smelter that was running in the NATO countries," Scott said in a virtual panel discussing the EPI's May 25 report on the tariff's impact.

"This was critical for national defense that we not lose this capacity as well as maintain the capacity to produce our own aluminum for the supply chains, and I think the COVID-19 crisis has shown just how important it is to be self-sufficient in these primary commodities."

The EPI report concluded that the aluminum tariffs succeeded in fulfilling their intended effect and have allowed aluminum manufacturers throughout the supply chain to thrive.

"The domestic producers of both primary aluminum and downstream aluminum products have made commitments to create thousands of jobs, invest billions of dollars in aluminum production and substantially increase domestic production since Section 232 tariffs were imposed in March 2018," the report said.

Jesse Gary, who will become the CEO of US-based Century Aluminum in July, said the company would not have been able to restore its lost capacity without the presence of the tariffs.

"We've restarted idle capacity and upgraded technology at our Hawesville [Kentucky] smelter, which was operating at less than 50% capacity utilization before the Section 232 program went into effect," he said during the panel discussion. "The smelter is now operating around 80% of capacity, and we have plans to restart the final pot line."

Century also plans to increase capacity at its Mt. Holly smelter in South Carolina from 50% to 75% later this year, Gary added.

Tariff must remain for continued growth

Gary said the tariffs must stay in place for the foreseeable future so that the domestic industry can continue its path to a stable recovery.

"We've only begun to start to reinvest into our smelters and to bring production back ... but this is heavy industry, and it takes a long time to put this money back in and to bring these plants back up and to bring these jobs back," he said. "We're going as fast as we can, but we've got a long way to go, and to achieve that we really do need the tariff program to stay in effect."

United Steelworkers International President Tom Conway said this "isn't the time to relax" as the domestic aluminum industry hasn't fully recovered and still needs the tariffs.

"While there's been some rebuilding of the aluminum industry and some capacity to come back, we are far from being as self-sufficient as we ought to be as a nation," Conway said.

"There's no need to lift this. Go slow until we're at a capacity in the US where we're confident and sufficient that we can make our own aluminum and meet our own needs and not be reliant on another nation."

Adam Hersh, a visiting economist with the EPI who worked on the report, said the industry may face even greater challenges in today's market, compared to previous years, if the tariff is lifted now.

"Although we've seen some positive signs to the global economic situation that is going to weigh on global demand for the foreseeable outlook, the excess capacity problem [in other countries such as China] didn't go away with the pandemic," he said. "In fact, more capacity has been built over the past year, which means that US producers will face even more pricing pressure."

Report sees no downstream harm

The EPI report analyzed the impact of the Section 232 aluminum tariff on downstream producers and concluded that any pricing effects from the tariff on manufacturers and consumers were negligible.

Hersh said the report's findings debunk claims that the tariffs caused price spikes that harmed downstream producers.

"When these measures were announced, there was a lot of hysterical lobbying from groups in opposition making wild predictions about how much the measures would damage the US economy," he said, adding that jobs in the industry were created, rather than lost, since 2018.

The report's analysis showed "no statistically significant causal relationship between the price of aluminum products and the prices of goods produced in top aluminum-consuming industries."

The report listed 55 downstream aluminum processing plants that have received new investment for expansion since 2018.

'Great supply response'

Gary said there is no reason to remove the tariffs at this time without evidence of the trade program harming downstream producers or other sectors of the US economy.

"The real question to me is why wouldn't you leave it in effect when we see great supply response from our portion of the industry, and we've really seen no downstream negative implications as a result of the program," he said. "This seems to be a really good sweet spot here that I think can help revive the US industry without really causing any disorderly effects in our own markets."