Increasing Tariffs Alone Won't Suffice for the Rescue of American Aluminum Industry
Trump's decision to slap a 25% tariff on imported aluminum ain't just stirring the pot in the trade world, it's causing quite a storm in the aluminum industry. From cars to beer cans, this metal is crucial for a whole lotta things, and recent debates about tariffs, supply chains, and domestic production are shaping the future of this industry.
Let's face it, the aluminum industry ain't exactly flourishing, and if we wanna change that, we need to focus on the main cost driver: energy.
Now, here's the lowdown. The U.S. mainly produces recycled aluminum, while primary aluminum – the kind made from raw ore – is essential for a whole host of goods. Guess who supplies most of that? Yep, you got it – Canada. Out of all the primary aluminum used in the U.S., around 60% comes from our friendly neighbor to the north and approximately 58% of all aluminum imports are from Canada. Domestic production ain't cutting it, folks.
There's no shortage of opinions about tariffs out there, but one thing's clear: higher consumer prices for cans, cars, and electronics. Some producers think higher prices will shift people to buy local, while others argue that people will switch to alternative materials altogether.
History tells us that these tariffs didn't save the aluminum industry the last time they were imposed. In 2018, the Trump administration levied Section 232 tariffs on aluminum, hoping to help the industry, but it didn't stop the overall decline.
Ever since, we've seen smelters closing left and right: Alcoa's Intalco smelter in Washington in 2020, Century's Hawesville facility in Kentucky in 2022, and Magnitude 7 Metals facility in Missouri in 2024. Today, only four smelters remain in the U.S., and they're battling high energy costs and expensive fossil fuels.
The real solution to breathe new life into the U.S. aluminum industry isn't tariffs – it's electricity. Primary aluminum production is incredibly energy-intensive – electricity costs make up around 40% of production costs. U.S. energy rates are around 32% higher than those in Canada, where much of the aluminum supply is generated using cheap, renewable hydroelectric power. Some manufacturers have been clamoring for a domestic supply of low-carbon primary aluminum, and this need will only grow with these new tariffs.
To sum it up, if our government wants to boost domestic aluminum production, they should focus on energy solutions, not tariffs that raise costs for consumers and businesses. The U.S. must expand renewable energy capacity, invest in nuclear power, enhance energy efficiency, and support policies to provide clean and cheap energy for aluminum producers. Playing catch-up with Canada's energy advantage will be no easy feat, but it's the key to a thriving aluminum industry in the U.S.
The reliance on primary aluminum, which is primarily sourced from Canada, is significant for various goods, including technology and sports equipment. The high energy costs associated with primary aluminum production in the U.S., which are about 32% higher than those in Canada, present a challenge for the industry's growth.
