On 31st May, the White House issued a presidential proclamation adjusting imports of aluminium into the US. It announced that, as of 1st June, aluminium imports from EU countries would be subject to a 10% import duty.
An increase in US protectionism has been on the table for many months – it was a feature of Donald Trump’s election platform, although the specifics have taken time to emerge.
Here is a brief timeline outlining how the aluminium situation has evolved:
|19th January 2018||US Secretary of Commerce Wilbur Ross submitted a report looking at the effect of aluminium article imports on US national security under section 232 of the Trade Expansion Act of 1962. The report concluded that aluminium imports had reached a level that threatened national security.|
|8th March 2018||Donald Trump officially responded to the report with a proclamation agreeing with Ross’s findings and imposing a 10% tariff on aluminium imports.|
|22nd March 2018||Trump issued a further proclamation outlining the outcome of negotiations with various countries following his announcement earlier in the month.
Argentina, Australia, Brazil, Canada, Mexico, South Korea and the EU had successfully negotiated exemptions and had until 1st May to come to an agreement with the US on “satisfactory alternative means to address the threatened impairment” to US national security.
|30th April 2018||Trump issued another proclamation announcing that the US had reached an agreement in principle with Argentina and Australia, and extended their exemptions to finalise the detail. The agreements included “measures to reduce excess aluminium production and excess aluminium capacity, measures that will contribute to increased capacity utilisation in the United States and measures to prevent the trans-shipment of aluminium articles and import surges.” These include quotas.|
|31st May 2018||In this proclamation, Trump confirmed that a 10% tariff would apply starting 1st June to aluminium imports from all countries except Australia and Argentina.
There is a process for individual companies with a US presence to seek an exemption for their products, and DIT and BEIS are supporting companies with this.
Cecilia Malmström, EU Trade Commissioner, confirmed that the EU was sending complaints to the WTO in response to the tariffs.
Under WTO rules, the EU has to wait at least 30 days to formally implement rebalancing measures. It notified the WTO of the list of US imports on 18th May, so can trigger the tariffs on 20th June. In the 10-page list, the most noteworthy are bourbon, jeans and motorbikes, but it also includes 103 steel and 8 aluminium product lines, as well as sweetcorn, cranberries, tobacco, makeup and clothing. The EU’s countermeasures are estimated to affect approximately £2.5 billion of US exports.
The EU is also looking at safeguarding measures to protect the EU from an influx of aluminium displaced by US barriers. It has 9 months to decide whether to take action. In preparation, the Commission is implementing plans to prepare a surveillance system for aluminium in case it decides to proceed.
The Prime Minister has expressed her disappointment in statements such as: “The EU and UK should be permanently exempted from tariffs, and we will continue to work together to protect and safeguard our workers and industries.” She had a 30-minute call with President Trump on 4th June, but further expected discussions at the G7 summit in Canada didn’t materialise.
There is a school of thought that the UK is only affected as an EU member state, and that Trump’s aim is to make a statement about other European exports, particularly in the automotive sector. A UK-only exemption would be illegal at present, but could be possible after Brexit.
Other countries are also retaliating. Canada is levying tariffs on US steel and aluminium, as well as exports such as sleeping bags, quiche and playing cards. Mexico is implementing countermeasures on steel, sausages, bourbon, fruit, lamps and various cheeses, among others.
Implications for UK aluminium
The UK government – and the Aluminium Federation – have consistently rejected the idea that UK aluminium exports represent a threat to US national security. In fact, the UK is recognised as a valuable US security partner, as evidenced by our commitment to spending 2% of GDP on defence and our joint efforts developing cutting-edge technology (for example, the F-35 fighter jet). Robert Wood Johnson, the US Ambassador to the UK, even wrote to this effect in The Telegraph on 9 June.
The tariffs will affect UK businesses in 4 major ways:
- Distorted global markets and prices – the 2018 global market demand for aluminium is set to increase by over 5% year on year, translating to a total market size of 66 million tonnes, but the tariffs may impact this growth
- Disrupted supply chains – by increasing costs and complicated logistics, including for US companies (the US is heavily reliant on imported aluminium, which is a crucial raw material for key industrial markets)
- Redirection of material – from other countries, particularly China
- Damage to industry and business – the aluminium industry needs stability, security and certainty so it can invest in growth and development, and as with all industrial markets, the UK wants a level playing field to compete in
Recommended next steps
We recommend pursuing 2 goals:
- Seeking a permanent and unconditional exemption from the US tariffs
- Taking steps to address over-capacity coming out of China – this is essential to protect our markets from imminent redirected trade flows
To achieve these goals, we recommend the UK Government focus on 3 priorities
- Continuing dialogue with the US in coordination with the EU and our associates in Canada to (a) achieve a permanent exemption and (b) work together towards the objective of a sustainable aluminium industry
- Implementing safeguard measures, particularly a quota that allows traditional volumes to enter the UK and EU but blocks additional volumes to ensure protection from redirected trade flows
- Continuing discussions with the Aluminium Federation regarding the industrial strategy and other policies needed to deliver a fair, sustainable and competitive market for UK aluminium
As the voice of the UK aluminium industry, we will continue to promote aluminium as a first-choice material to drive wider use and foster innovation. We will also continue to work, engage and support our members through this challenging period.
For more information on the impact of US tariffs on the aluminium industry, contact us on +44 (0)121 601 6363 or visitwww.alfed.org.uk