Nothing new under the sun, for years we have been reporting the same facts for the european union
by Mario Conserva
In March 2018, U.S. President Donald Trump imposed blanket tariffs of 10% on aluminium imports (and of 25% on steel) as support of domestic producers and stimulate the growth of US economy. The logic behind the tariffs was that they should have given US primary aluminium producers protection from the international supply, indispensable due to the increasing shortages of domestic production. In fact, the decline in primary metal production for example in the period 2003 – 2017 had been very strong from 1.5 million tonnes in 2003 to 740.9 thousand tonnes in 2017.
As result, in 2017 the United States was the largest global aluminium (and steel) importer, bought overseas 7 million tonnes of aluminium, both primary and semi-finished, (and 34.6 million tonnes of steel).The tariffs were imposed to return production to the US, improve aluminium-making industries economics, bringing new volumes and working places, boosting profits and investments. The impact was expected to widespread across the economy, but the overall effect of the trade deficit was exactly the opposite. At the end of 2018 the deficit grew to the highest since 2008 level of US$ 621 billion, which means it has grown by US$ 119 billion, or 24%, in two years. Trade Partnership Worldwide estimated that ”…imposed, under Section 232, 10% tariffs on aluminium affected US$ 9.8 billion of US imports and realized in the additional cost burden for US economy at total US$ 983.9 million annually”. Anne O. Krueger, a Senior Research Professor at John Hopkins University (and a former World Bank chief economist and former first deputy managing director of the International Monetary Fund), highlighted “…..it is estimated that the metal tariffs have cost Americans US$ 900,000 per year per job saved.” According to the USA’s authority’s logic, while domestic steel and primary aluminium industries would gain from the tariffs, all downstream producers and end-users would not loss a lot; however, sectors such as construction, automotive, aerospace, food and beverage manufacturing were negatively impacted by tariffs by boosting input costs (which could be passed on to the customer, thereby raising consumer prices). With costs going up, jobs and prices would take a hit. In total, summing up we can say that tariff for unwrought aluminium did not boost US domestic primary aluminium production, did not create a lot of jobs, did not increased US GDP, while caused damage to all consuming industries. Experts estimated aluminium tariffs added at least US$30-40 to each car cost and additional cost of only Ford company totalled at US$100-130 million. Beer producers reported significant losses as prices of aluminium cans go up, estimating at about US$350 million per year. Wide varieties of companies from different industries (construction, transport, boat producers, kitchen appliances and furniture producers and even space industry) mentioned financial difficulties related to aluminium import tariffs. Based only on the reported evidence from several companies, some independent researches estimated the loss from tariff introduction for US economy at US$0.5-1.0 billion annually, and it is a completely normal fact because it is in reality that any import tariffs lead to the additional costs for final consumers and is in the overall an economic loss for the country. On the other hand, as we have argued for years, the import duty on raw materials could not as expected to solve the real basic question of the primary aluminium production, which is the cost of energy, in Europe as well as in the United States. Even with US import tariffs in action, US domestic producers of primary aluminium reported financial losses, an eloquent reported example is Century Aluminum, which operates three smelters and has led the lobbying charge against Canadian imports, the company announced for the second and the third 2020 quarters losses of more than US$ 80 million. The conclusion is always the same, any type of import tariffs leads to additional costs for final consumers and realized in the overall economic loss for the country.
In the specific case referred to the initiatives of the Trump administration, tariff for primary aluminium did not boost US domestic primary aluminium production, but decreased trade balance and caused damage to all downstream aluminium industries. Experts estimated aluminium tariffs added at least US$30-40 to each car cost and additional cost of only Ford company totalled at US$100-130 million. Beer producers reported significant losses as prices of aluminium cans go up, estimating at about US$350 million per year. Wide varieties of companies from different industries, such as construction, vehicle and equipment makers, boat producers, kitchen appliances and furniture producers and even space industry, reported financial difficulties related to aluminium import tariffs. Although with different evaluations and methods of analysis, we are close in quantitative terms to the assessment of the damage created by the duty on raw metal in EU, estimated by the studies of the Luiss University of Rome at almost one billion euros per year in the last 20 years. Are these sensational and detailed evidence not enough to make even the most stubborn deniers understand that the EU duty on primary aluminium is a gigantic error to be removed for helping the manufacturing industry?