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U.S. Industry Representatives Discuss the Effects of Section 232 Tariffs and USMCA

During a Capitol Hill Briefing in Washington D.C. on November 27th, representatives from the Aluminum Association, manufacturers, farmers, and end customers addressed the the U.S. International Trade Commission on how the Section 232 tariffs on aluminum and steel have impacted the U.S. industry and urging the commission to eliminate or provide exemptions for these tariffs through the U.S.-Mexico-Canada Agreement (USMCA). The discussion was hosted by Heidi Brock, president and CEO of the Aluminum Association, and moderated by Kris Denzel, senior director, International Policy, U.S. Chamber of Commerce.

“The Section 232 tariffs on aluminum and steel have been in place for less than seven months, yet strain on U.S. industry is already starting to show,” said Brock. “As a result of the Section 232 tariffs, American exports and imports worth over $13 billion have been hit by tariffs just within North America. And that number rises by $500 million later this week. That’s why we believe it is vital to American workers and companies that the U.S. provide quota-free tariff exemptions to Canada and Mexico as part of the USMCA. The USMCA cannot work as intended while 232 tariffs are in place.”

Buddy Stemple, CEO of Constellium Ravenswood, also addressed the panel, beginning with an introduction to Constellium, which has 12,000 employees and generates over $5 billion in revenue, with the U.S. representing 40% of its business. Regarding the Section 2332 tariffs, Stemple said:

We must make sure that in attempting to protect the U.S. industry, we don’t take actions that could inadvertently harm it instead.

And the Section 232 tariffs, which imposes a 10 percent tariff on virtually all aluminum and aluminum product entering the United States – not just from China but from all countries – is the wrong solution to a real problem. While well-intentioned, the tariffs are making the U.S. aluminum industry, including Ravenswood, less competitive on the world stage.

Here’s why. The aluminum industry in the United States simply does not make nearly enough primary metal domestically to support the record demand for aluminum we enjoy today. The U.S. consumes between 5 and 6 million metric tons of primary aluminum each year but has less than 2 million metric tons of total primary smelting capacity. Even if we brought all of our U.S.-based smelters back on line tomorrow, we would not have nearly enough primary aluminum capacity to satisfy the growing domestic demand.

The bulk of the difference is made up through Canadian imports. This is why we believe that all countries – including Canada, but also the European Union – that play by the rules and operate as market economies should receive quota-free exemptions from the current 232 tariffs.

Stemple addressed concerns regarding the current process for excluding companies from the 232 tariffs, noting issues surrounding large volume requests that have recently been granted that could distort the U.S. aluminum market. He said:

Requests for massive volumes of common alloy aluminum sheet have been approved, even though some of these imports are coming from China. In particular, the approval of exclusion requests by Ta Chen International now allow for import of more than 1 billion pounds of Chinese common alloy sheet — a substantial share of the U.S. market for common alloy products.

The exclusion was granted less than one year after the Administration launched its self-initiated unfair trade case on imports of common alloy aluminum sheet from China that I was referring to.

Ironically, while these large exclusions are granted for products that could be produced by U.S. manufacturers, we are still waiting for an approval of our exclusion request for Airware®, a niche and proprietary product that is not available in the U.S. and is being used for defense application.

We strongly urge the Commerce Department to evaluate all exclusion requests – including those for which no objections are filed – to ensure that the volumes requested are proportional to the U.S. market, and that they do not include products coming from China.

End user industries also spoke to the challenges that the imposition of tariffs have caused their businesses. Brandon Skall, CEO and co-founder of DC Brau, explained that the aluminum tariff has caused beer brewers to see delays and even cancellations of aluminum can supplies. “We began seeing signs of aluminum shortages in our lead times pretty quickly,” he said, noting that costs have increased by 3.5 cents/can along with $25,000 to acquire the equipment needed to apply labels themselves. This “more than doubled the cost of what we were paying before for cans,” explained Skall. “Hiccups like this can and will cost many brewers their businesses.”

Jennifer Thomas, vice president, Federal Government Affairs from the Alliance of Automobile Manufacturers, noted, “The Alliance was disappointed that with the conclusion of the USMCA negotiations, the Administration did not lift the Section 232 tariffs on imported steel and aluminum. The success of both the new USMCA and our nation’s auto sector continue to be undermined by these tariffs. … The auto industry is the second largest consumer of steel and aluminum, these steep and unexpected increases in the price of key manufacturing inputs are driving up production costs for all U.S. automakers, threatening our industry’s competitiveness in the global market. As a result, several automakers have recently lowered their full-year earnings outlooks due to the increased costs of steel and aluminum. We urge the Administration to eliminate the steel and aluminum tariffs or, at the very least, provide a permanent exemption from these costly tariffs to Canada and Mexico prior to the signing of the USMCA.”

Brock also questioned the effectiveness of the Section 232 tariffs. “Across-the-board tariffs are not addressing the problem of China’s illegally subsidized aluminum overcapacity,” she explained. “We have seen very little evidence that the Section 232 tariffs are impacting behavior in China, which continues to illegally subsidize its aluminum industry. China’s aluminum capacity has grown by 73% over the past five years, and an additional 8% just this year, despite the Trump administration’s tariff regime. In fact, there is some evidence that the tariffs may actually be helping Chinese aluminum producers to enter new markets by increasing China’s price advantage over aluminum produced in North America.”

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