Tariff – a tax placed on a particular class of imported goods.
In January of 2018, the Department of Commerce delivered Section 232 reports on steel and aluminum to the President. February 2018, Section 232 was publicly released stating that the quantities of steel and aluminum imports “threaten to impair the national security.” The reports concluded that the United States steel imports were nearly 4 times our exports, and that aluminum imports had risen to 90% of total demand. The Department of Commerce recommended to the President that he should take actions to protect the “long-term viability of our nation’s steel and aluminum”.
March 2018, President Trump imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports (exempting Canada and Mexico) in order to protect national security. The media has discussed the 10%/25% tariffs in great length. However, the impact on common aluminum alloy is worse. Common aluminum alloys of 1000, 3000, 5000 series from China has an additional tariff that was enacted on January 16th, 2018. This was put in place by the International Trade Administration or ITA. Here is the breakdown for aluminum:
- 34.99% tariff enacted 1-16-18
- 10% tariff enacted 3-23-18
- Existing tariff 3.2%
- As of 1-1-18 we had a tariff of 3.2%. Now we have a tariff of 48.19%. (34.99% +10% + 3.2%)
Here is the problem, US companies don’t have the smelting capability anymore to increase production of the imposed tariffed aluminum alloys. Nor will they ever, to meet US demands. Over the past 18 years the US has shuttered all but 2 smelters stateside, sighting pollution and the inability to produce enough energy for the process. As of now there is no North American production of thin common alloy tread plate aluminum. There are no future plans for this either. Limited common alloy tread plate is produced, but only in thick gauges, .125 and up, and only in what is termed “firetruck quality”. This is very expensive.
In addition to tread plate aluminum, smooth mill finish has been drastically affected. The same tariffs apply to this. There is some North American production of this material but not even close to enough to supply even current usages. What are we doing now? Sourcing material from Egypt, Brazil, and Slovenia with 10% tariffs.
Panic buying has now impacted the market. Many aluminum suppliers have no mill finish in stock or limited amounts coming in. As a result, smooth mill finish aluminum has increased this year alone by 28% and forecasts expect it to continue to rise. The third quarter of this year will be very challenging. US manufacturers of finished goods face shutting their doors and laying off all their workers, OR, shifting manufacturing back to overseas companies, including China, to produce finished goods. Which then get shipped back to the US without facing the large tariffs on raw materials. This again shutters American manufacturing jobs. The conclusion, incomprehensible tariffs have only one winner, the government.