U.S. Industry Leader Warns About Potential Loss of 100,000 Jobs Due to Trump's Aluminum Tariffs
With a 15% hike in tariffs coming up next month, domestic manufacturing is set to get a boost under President Trump's aggressive strategy. However, this move could spark a global trade war. The aluminum industry, in particular, could face a significant blow, with potential loss of around 20,000 direct jobs and an additional 80,000 indirect jobs. This information was shared by William Oplinger, CEO of Alcoa, at the BMO Global Metals and Mining conference.
Alcoa, headquartered in Pittsburgh, has a substantial portion of its aluminum production in Canada, and the company is lobbying for an exemption on Canadian metal exports to the US, allowing for two-thirds to enter duty-free. Coca-Cola is another company preparing for the tariff impacts by shifting to more plastic and glass packaging to avoid higher input costs.
Canada, the leading supplier of aluminum to the US, exported $11 billion worth of raw aluminum and aluminum-containing goods to the US last year. The US imported a total of $27 billion worth of aluminum, with other major sources including China, Mexico, and South Korea. In contrast, the US exported $14 billion worth of aluminum globally.
Tariffs on foreign imports can result in higher prices for consumers and potential retaliatory tariffs from other countries. The uncertainty surrounding tariff durations makes it challenging for companies like Alcoa to make investment decisions in upgrading domestic facilities to avoid tariffs.
Previous tariffs, such as the 2018 steel and aluminum tariffs, show mixed results. While they temporarily decreased imports and boosted domestic production, companies eventually reverted to importing from cheaper foreign producers, resulting in even higher prices for consumers. The retaliatory tariffs impacted various American goods, including motorcycles, jeans, peanut butter, bourbon, and whiskey.
In light of the potential economic impacts, Alcoa, with some untapped domestic production capacity, is considering whether it's financially viable to upgrade its outdated and inefficient domestic facilities to avoid tariffs. Despite the challenges, Alcoa's CEO mentioned that decisions on aluminum production have horizons of 20 to 40 years, implying that tariff structures for a shorter duration might not drive investments in the US.
Sources:1. U.S. International Trade Commission (USITC), 2018.2. International Monetary Fund (IMF), 2019.3. Peterson Institute for International Economics (PIIE), 2021.4. United States Trade Representative (USTR), 2020.
The tariffs on foreign aluminum imports could negatively impact Alcoa, given its substantial production in Canada, prompting the company to lobby for an exemption. Canning operations may be affected as well, considering the potential rise in aluminum costs due to tariffs. Given the mixed results of previous tariffs and the lengthy investment horizons in the aluminum industry, it's likely that Alcoa will carefully evaluate the financial viability of upgrading its domestic facilities.
