09/15/2020 14:46 EDT | Updated 09/16/2020 10:07 EDT

Trump Administration Drops 'Goofy' Tariff On Canadian Aluminium

"Canada remains strong and united when faced with these illegal tariffs on aluminium exports," said Deputy Prime Minister Chrystia Freeland.

Two hours before Canada was set to announce how it would retaliate against the controversial U.S. aluminum tariff, President Donald Trump’s administration reversed course.

It will once again allow Canadian raw aluminum to be imported into the U.S. duty free, the Office of the United States Trade Representative said in a statement Tuesday. It had imposed a 10 per cent tariff in August, incorrectly claiming Canadian producers were flooding the American market and posing a threat to national security.

The office said it changed its mind “after consultations with the Canadian government,” determining that while there was a “surge” in aluminium imports earlier this year, levels are expected to normalize in the coming months. 

Deputy Prime Minister Chrystia Freeland was set to announce dollar-to-dollar retaliatory tariffs Tuesday afternoon. Instead she celebrated the “good news” that “common sense has prevailed.”  

“Canada salutes this change of position and would like to continue to reinforce our trade relations with the U.S.,” Freeland told reporters.

“This being said, let’s be clear about the reasons for which we got to here. This summer, Canada remains strong and united when faced with these illegal tariffs on aluminium exports and avoided escalation without backing down.” 

The Canadian Press/HuffPost Canada
U.S. President Donald Trump and Canada's Deputy Prime Minister Chrystia Freeland.

If Canada exceeds set monthly volumes of between 70,000 and 83,000 tons, the U.S. may reimpose the tariff, said the U.S. Trade Representative. 

These quotas were not part of a negotiation, but rather a unilateral decision by American officials, Freeland said. 

“Canada does not accept quotas. Should the U.S. decide to reimpose tariffs we have our own retaliatory tariffs. It’s extremely simple and extremely clear.”

After dealing with the Trump administration for four years, Canada is ready for anything, she said. 

“We will always stand up for the national interest.”

Trump announced the aluminum tariff on Aug. 6 at an Ohio Whirlpool factory, following lobbying from two American aluminum producers, and in the face of the new NAFTA agreement with Canada. 

“To be a strong nation, America must be a manufacturing nation and not be led by a bunch of fools. That means protecting our national industrial base,” Trump said

In reality, Canadian exports to the U.S. were five per cent lower in the first half of 2020 then the same period of 2017, said the Aluminum Association of Canada in a statement. The industry was playing catch up from previous tariffs and the impact of the pandemic on the economy. 

He swings wildly at any shiny ball he can find.Greg Anderson, University of Alberta

This data was backed up by the U.S.’s own Aluminium Association, and the world’s largest aluminum companies. “Efforts to ‘Blame Canada’ miss the mark,” said Tom Dobbins, president and CEO of the association, in a statement. “Imports of primary aluminium from Canada today are consistent with long-term trends pre-dating the imposition of (tariffs).” 

The “goofy” raw aluminum tariff dispute is in line with some of Trump’s other economic policies, said University of Alberta Prof. Greg Anderson, an expert on North America’s political economy. 

“He swings wildly at any shiny ball he can find,” Anderson said, pointing to the example of TikTok.

President Donald Trump speaks during an event at the Whirlpool Corporation Manufacturing Plant in Clyde, Ohio, on Aug. 6, 2020. 

A few days before Trump announced the aluminum tariffs, he threatened to shut down the Chinese-owned social media app because of “security” concerns. He then said he would allow an American company to acquire the app, but expected a “substantial” cut of the deal. 

“The only reason that it’s an issue is because it caught his radar,” Anderson said. “There are many, many things that are kind of the same and so they come across his desk and he becomes infatuated with his power over them.” 

In 2018, Trump enacted the same tariff on aluminum, plus a 25 per cent tariff on Canadian steel. At the time, he said he needed to protect his country’s national security by limiting dependence on Canadian steel and aluminum suppliers. Canada is the largest source of aluminum imported by the United States. 

The impact of those tariffs, which ended mid-2019, was “noteworthy,” reported Statistics Canada. Aluminum exports to the U.S. fell by more than half, reaching their lowest level in more than 10 years. 

One manufacturing company in Sault Ste. Marie, Ont. laid off 40 mill workers because of both the steel and aluminum tariffs. 

U.S. automaker General Motors also announced it would stop production at a number of plants, including in Oshawa, because of higher costs due, in part, to tariffs, and a decrease in demand for its cars. GM followed through with the plan, laying off thousands of Canadian workers in 2019

A month after the tariffs were lifted, Canada’s aluminum exports to the U.S. shot up nearly 50 per cent, Statistics Canada said. A year later, the industry has almost recovered to pre-tariff levels.

This time around, Trump faced significant pushback from producers and the Canadian government. 

“In the time of a global pandemic and an economic crisis, the last thing Canadian and American workers need is new tariffs that will raise costs for manufacturers and consumers, impede the free flow of trade, and hurt provincial and state economies,” Freeland said in a statement in August. 

U.S. President Donald Trump, left, and Canadian Prime Minister Justin Trudeau arrive for a round table meeting during a NATO leaders meeting in England on Dec. 4, 2019.

The pandemic has pushed aluminum prices and demand lower than in 2018 and 2019, which means Canadian producers have less room to absorb a 10 per cent tariff, said Unifor national president Jerry Diaz in an op-ed earlier this summer.

“In all likelihood, a significant number of smelters in Canada will be forced to shut their doors and hundreds, if not thousands, of Canadian workers will be forced into unemployment,” Diaz wrote in the National Post.

Americans, not Canadians, would’ve been most impacted by the tariffs, Aluminum Association of Canada President and CEO Jean Simard told HuffPost. Out of necessity, American manufacturers would continue to rely on Canada for a large chunk of their aluminum supply, and would pass on the increased cost from tariffs to consumers. 

Forty-three per cent of aluminium used by American companies comes from Canada. The rest comes from countries like China and Russia, said Simard. The U.S. produces only about one-sixth of its aluminum demand. 

“We have a decades-long existing integrated supply chain relationship with the U.S. Our logistics are far more efficient than anywhere else in the world and we are a stable, reliable supplier,” he said. 

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