The Tariffs the Trump 2020 Campaign Is Imposing on You

Why did Donald Trump announce tariffs of 10% on Canadian aluminum exports to the United States on Thursday?

Here are some possible answers:

1) Because he is lagging behind by 8% in the election polls against his Democratic opponent, Joe Biden;

2) Because he is trying to make people forget his catastrophic handling of the COVID-19 crisis;

3) Because to have any chance of being reelected, he absolutely must win several key states like Ohio, where there are a considerable number of workers in the aluminum industry;

4) Because he has an outdated view of international trade based on protectionism;

5) All of the above.

The correct answer, of course, is all of the above.

This is not the first time that Trump has targeted Canadian aluminum, 90% of which is produced in Quebec. In 2018, his administration imposed tariffs of 10% on aluminum (and 25% on steel) to put pressure on Canada during negotiations over the new United States-Mexico-Canada Agreement. They were abandoned after a year.

Trump is doing it again, this time to win votes in Ohio, a crucial state in the Nov. 3 election. There was a reason he made the announcement in an Ohio factory, in front of aluminum appliances.

Apart from the political aspect, is the Trump administration right in principle? Absolutely not. In fact, it is behaving like a bully that doesn’t want to play by the rules of international trade.

Washington is citing national security as its justification for the tariffs on Canadian aluminum. Since aluminum is needed for several key industries (including the military), the United States says it does not have to depend on foreign countries to produce aluminum. Big deal! This is just a legal pretext, as it is very difficult to challenge a decision made for national security reasons even in international trade.

The Trump administration is using the increase in Canadian exports of aluminum ingots between September 2019 and March 2020 to justify the 10% tariffs on aluminum ingots (the tariffs don’t apply to value-added aluminum products). In theory, this is true. But that’s a hypocritical argument because there is a very good reason for the rise in ingot exports.

Canada usually divides its aluminum production as follows: 45% are value-added products and 55% are aluminum ingots. Due to a drop in demand and then COVID-19, the demand for value-added products declined significantly. Canadian aluminum smelters, therefore, produced more ingots than they exported to the United States (up to 85% of aluminum exports in June 2020) as they usually do (there are no aluminum warehouses in Canada).

This temporary imbalance was already decreasing in July and will continue to decrease as the economy recovers, the Aluminium Association of Canada estimates. However, with the imposition of tariffs, the United States will replace some of Canada’s aluminum with aluminum … from Russia, according to the AAC.

If the United States wants to produce more aluminum, it should follow Canada’s lead and invest in modernizing its factories. American aluminum plants are the least efficient on the planet, while Canadian plants are among the best in the world.

Then again, it’s easier during an election campaign to say that “Canada was taking advantage of us, as usual,” as Trump did this week.

The administration of Justin Trudeau was right to retaliate by imposing equivalent tariffs (of $3.6 billion) on American products beginning in mid-September.

However, the solution will come from business communities in the United States who are strongly opposed to tariffs. Who denounced the tariffs this week, warning that they “will increase costs for American manufacturers?” Trudeau? Chrystia Freeland? It was the U.S. Chamber of Commerce.

If elected, Biden will cancel these absurd tariffs.

He won’t do it to please Canada, the United States’ closest ally and trading partner. He will do it so that Americans don’t pay more for their next washing machine.