US metal tariffs: Trump delays on EU, Canada, Mexico, permanently excludes others

01 May 2018 --- US President Donald Trump has delayed the implication of aluminum and steel tariffs on the EU, Canada and Mexico until June 1, while agreements to permanently exclude Argentina, Australia and Brazil have been reached. The tariffs – and news of continued uncertainty around them – are sparking concern for metal packaging suppliers within the industry.

On March 23, Trump implemented a 10 percent aluminum tariff and a 25 percent steel tariff on imports but agreed on temporary exemptions for the EU, Australia, Argentina, Canada, Mexico and Brazil. The temporary exemptions were due to expire at 12:01 AM on Tuesday and Trump has since moved to push through agreements which will exclude Argentina, Australia and Brazil. Details of the deals are disclosed and will be finalized in the coming days.

The White House states: "The administration is also extending negotiations with Canada, Mexico, and the European Union for a final 30 days. In all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment, and protect the national security.”

One of the largest global metal manufacturers, Ball Corporation, has urged the Trump administration to exclude aluminum can sheet or tinplate steel from the tariffs. Chairman, president and CEO of Ball Corporation, John Hayes, said in a statement: “Aluminum can sheet and tinplate steel have no national security applications, and tariffs on them likely will give negative downstream impacts on food and beverage manufacturers, as well as increased prices for consumers.’’

The Beer Institute has estimated that over half the beer produced in the US is packaged in aluminum cans or bottles and that the proposed 10 percent tariff would hit the US beverage industry with an additional US$347.7 million tax.

Molson Coors – one of the world’s largest brewers by volume – was quick to vocalize concerns around potential job losses and price rises when the tariffs were originally announced. In a statement, the company said, “There simply isn't enough supply to satisfy the demands of American beverage makers.’’

"Like most brewers, we are selling an increasing amount of our beers in aluminum cans and this action will cause aluminum prices to rise and is likely to lead to job losses across the beer industry."

However, even among US aluminum producers, there is widespread disharmony. 114 producers – including Alcoa, Vulcan, and Rio Tinto Alcan who have a combined workforce of over 700,000 – grouped together to share their concerns with President Trump in a letter dated March 6, 2018, referring to the tariff plans as ”deeply concerning.” The authors share president and CEO of the Aluminum Association, Heidi Brock’s, concerns that Trump is not adequately targeting the US’s fourth-largest supplier of aluminum, China, who have long been accused of undercutting the market which cheap materials. Opposition to the new tariffs believe that the industry’s North American and European trade partners will suffer most.

The tariffs are designed to reduce trade dependency on other countries and revitalize the struggling US aluminum and steel industries. Trump has also cited national security concerns under Section 232 of a 1926 law enacted during the Cold War, arguing that the US would be left vulnerable in the case of disrupted trade streams without greater self-sufficiency in the steel and aluminum industries. The US Secretary of Defence has, however, stated that the US military requires no more than 3 percent of US aluminum and steel production.

The US currently imports 90 percent of the aluminum it uses, predominantly from Canada and Russia. Expectedly, there has been a national and international backlash, including from within the US food and beverage industry, which relies heavily on aluminum imports for product packaging. The White House estimates that the new tariffs would enable the US metal industries to grow their capacity output rates above 80 percent for the first time in years.

Australia’s Prime Minister Malcolm Turnbull and the country’s Trade Minister Steven Ciobo approve of the exemption: “The exemption reflects the fair and reciprocal trade relationship Australia shares with the United States and underpins the unbreakable friendship between our two great nations,” they said in a statement.

It is expected that there will be no further extensions beyond June 1 to delay the imposition of planned metal tariffs.

The European Commission has released the following statement in response to Trump’s delays and exclusions: “The US decision prolongs market uncertainty, which is already affecting business decisions. The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security.”

“Overcapacity in the steel and aluminum sectors does not originate in the EU. On the contrary, the EU has over the past months engaged at all possible levels with the US and other partners to find a solution to this issue.”

“The EU has also consistently indicated its willingness to discuss current market access issues of interest to both sides but has also made clear that, as a longstanding partner and friend of the US, we will not negotiate under threat. Any future transatlantic work program has to be balanced and mutually beneficial.”

“European Commissioner for Trade Cecilia Malmström has been in contact with US Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer over the past weeks, and these discussions will continue.”

In March, FoodIngredientsFirst reported that the EU is planning to impose tariffs on orange juice, bourbon, peanut butter and cranberries among other items if the US goes ahead with the levies on steel and aluminum.

By Joshua Poole