In a social media post on Monday November 25 — three days before the Thanksgiving break that marks the start of the US holiday season, during which trade activity slows — Trump said he would impose an additional 10% tariff on goods from China, as well as 25% tariffs on all products from Canada and Mexico.
The news was received with caution by analysts and aluminium industry participants, who told Fastmarkets that these tariffs would be detrimental to the US industry, which they aim to protect.
“Canadians could not care less since the US is tied and 100% reliant on Canadian aluminium imports,” Fastmarkets analyst Andy Farida said.
In 2023, the US imported 74.25% of its total unwrought, unalloyed aluminium from Canada, according to data from the US International Trade Commission.
“The biggest losers are end users and consumers. Things made in the US will be more expensive and less competitive. From a global trade flow [perspective,] these tariffs may look good at first but are likely to shoot the American corporates on their own two feet in the long run,” Farida added.
The proposed tariffs on Canadian aluminium will very adversely affect US manufacturers who need to buy Canadian aluminium for their manufacturing needs and export their finished products, an industry source told Fastmarkets.
“We will get squeezed because we will need to pay additional tariffs on the metal we buy, but we do not get tax rebate when we export. So this will be worse for US exporters,” the source said.
While welcoming Trump’s efforts to support American manufacturing by tackling unfair global trade, the Aluminum Association also believes that continued tariff exemptions for imports of Canadian aluminium — originally negotiated by Trump under the US-Mexico-Canada (USMCA) Agreement — are vitally important, Aluminum Association president and chief executive officer Charles Johnson told Fastmarkets.
“Open, tariff-free aluminium trade with Canada has underpinned much of the more than $10 billion in domestic investment the industry has made over the past decade. The US industry must source about two-thirds of the primary aluminium it uses every year from Canada, since all domestic smelters, even running at full capacity, cannot produce nearly enough metal to meet demand,” Johnson said.
“We will continue to work with the administration to tailor trade interventions to help our industry, and US manufacturing in general, succeed,” he added.
“In theory, if [Trump] goes through with it, then the implications are massive, and trade flows have the potential to alter quite drastically,” a European trader said.
“I would be surprised considering the US’ dependency on Canadian tonnes and Trump’s rhetoric around cost of living if it happens to the full extent, however. Offers will disappear on the forwards, but no one is super hungry to buy on spot in case it turns out to be poker,” the trader added.
“I’m not sure he can do it for Canadian aluminium, [which makes up a large share] of their imports. It would be a massive hit to US consumers of aluminium, so if he does this, maybe there is some sort of exemption for aluminium,” a second Europe-based trader said.
It is not certain whether the Mexican and Canadian tariffs can legally be changed, given that Trump personally negotiated the USMCA and legislatures in all three countries passed this trade agreement, according to Commodity Research Group president Edward Meir.
“But if Trump finds a way to make good on his threat, we should see notable upside pressure on aluminium premiums and domestic steel prices, as both are important Canadian and Mexican exports,” Meir said in a note.
Imogen Dudman in London contributed to this report.
(The 14th paragraph had erroneously referenced Canadian aluminium as making up 80% of US imports when this report was first published. This has since been corrected.)
The post Possible Trump tariffs on Canada, Mexico spur alarm in US aluminium market appeared first on Fastmarkets.
