Protecting U.S. Aluminum Demands More Than Merely Imposing Tariffs

Aluminum Tariffs: A Double-Edged Sword for the US Industry

The aluminum industry is under the spotlight, thanks to US President Donald Trump's 25% tariff on aluminum imports, including from Canada. The tariffs have sparked debates over trade, supply chains, and domestic production that continue to impact the industry.

However, focusing solely on tariffs might not be the key to revitalizing the US aluminum industry. Instead, let's delve into the root cause of escalating costs - energy sources.

To put things into perspective, the US primarily produces recycled aluminum, not primary aluminum (the kind made from raw ore). While recycled aluminum plays a significant role in various sectors like automotive and infrastructure, primary aluminum is essential for manufacturing daily-use items such as cars, beverage cans, electronics, and appliances.

The paradox here is that approximately 60% of the primary aluminum used in the US comes from Canada, while the domestic industry struggles to meet demand. As a result, imports become crucial, but the imposed tariffs could lead to increased prices for consumer goods like beer and soda cans, cars, and electronics.

Producers have mixed opinions about tariffs, with some arguing that higher prices will drive consumers towards locally-made products, while others fear consumers may shun aluminum altogether due to the increased costs. However, it's important to remember that the previous Trump administration's Section 232 tariffs in 2018 didn't halt the industry's downturn.

Since 2018, three primary aluminum smelters in the US have closed or curtailed operations. Today, only four remain, affirming the need for a sustainable solution. The answer might not be tariffs, but rather, energy.

Primary aluminum production is energy-intensive, and electricity is a significant factor in production costs. Currently, the US utilizes high-carbon energy sources such as coal and natural gas for electricity, which increases the overall cost of production. By contrast, Canadian aluminum is primarily produced using zero-emission hydroelectric power, making it more environmentally friendly and cost-effective.

Furthermore, manufacturers have expressed their desire for a domestic supply of low-carbon primary aluminum, which will become increasingly essential with the new tariffs.

If the US government truly wants to boost domestic aluminum production, it should focus on energy solutions rather than tariffs that impose higher costs on consumers and businesses. This could mean investing in renewable-powered smelters, collaborating with utilities for dedicated clean energy contracts, and upgrading existing facilities with energy-efficient smelting technology.

Moreover, locating new smelters near renewable-rich regions, leveraging carbon-aware procurement programs, and implementing emissions-linked trade policies could help compete with Canada's cost structure.

The demand for primary aluminum is projected to rise to 6.4 million metric tons annually by 2035. Without addressing these issues, the US might continue relying on imports or protected markets, rather than fostering self-sustainable growth.

Sources:1. "Reviving the U.S. Primary Aluminum Industry: An Action Plan" - Industrious Labs2. "Why U.S. Aluminum Producers Need to Focus on Low-Carbon Production" - National Renewable Energy Laboratory3. "Renewables and the Aluminum Sector: A Snapshot of Opportunities" - International Renewable Energy Agency4. "The Future of the U.S. Aluminum Industry: Strategies for Sustainable Growth" - Aluminum Association5. "The Impact of Tariffs on U.S. Primary Aluminum Imports: An Economic Analysis" - University of Tennessee's Center for Industrial Services.

The mixed opinions among producers regarding tariffs are Clear in Hawesville, as some argue that higher prices could boost domestic production, while others fear that consumers might abandon aluminum due to the added costs.
Despite the 25% tariff on aluminum imports, most primary aluminum Still comes from Canada, making solar-powered smelters in the US a potential solution to decrease costs and increase self-sustainability.
Given the rising demand for primary aluminum and the need for low-carbon production, the US government should consider strategies such as renewable-powered smelters, carbon-aware procurement programs, and emissions-linked trade policies to Foster a competitive aluminum industry in the coming years.