The world's dumbest tariff has been revealed |
With the Iran war threatening supplies of critical, energy-intensive materials, one might assume the U.S. government was prepared for this risk and has been working hard to soften the blow. In the case of aluminum, that assumption would be incorrect. Instead, Washington is making things worse.
The United States has spent much of the past decade constructing a protectionist wall around the domestic aluminum industry. First, in 2018, U.S. President Donald Trump invoked Section 232 of the Trade Expansion Act of 1962 to impose 10% "national security” tariffs on aluminum products from most countries. Then last year, he raised the tariffs to 50% and eliminated exemptions for allies, while also expanding the levies to cover hundreds of derivative products — ranging from canned goods to industrial wires — that contain the metal.
Over roughly the same period, the U.S. implemented a web of "trade remedy” (antidumping and countervailing duty) measures on imports of aluminum extrusions, foil and other products. Imports, in turn, have declined substantially — especially after the 50% levies took effect.
So far, this is a standard U.S. tariff story, but aluminum isn’t a standard product. According to the U.S. Geological Survey, imports constituted approximately 60% of domestic consumption last year, even with high tariffs. This dependence does not reflect "unfair trade” but deep structural realities. Aluminum production is extremely electricity-intensive and U.S. power prices — along with fierce competition for electricity from AI and other high-value industries — have made smelting uneconomical relative to regions with abundant power and access to the core inputs bauxite and alumina.
In just the last few years, primary aluminum smelters in Washington, Missouri and Kentucky have each shut down and production has declined. Now, only four smelters are in operation, just........