Aluminum tariffs have put US producers on a level playing field

In many parts of the country, and particularly in rural America, there’s good news this holiday season. The aluminum and steel tariffs imposed in March have begun to revitalize local industries, with aluminum smelters and steel mills hiring and making new investments.

Critics claimed the tariffs would result in job losses and would adversely affect the U.S. economy. But since February, the U.S. manufacturing sector has added 198,000 jobs, and the overall economy has added 1.8 million jobs. That’s a far cry from the hundreds of thousands of job losses that some predicted. 

{mosads}A new report by the Economic Policy Institute tells the real story behind the 232 tariffs. It’s an analysis of the current U.S. aluminum industry that reflects a narrative not often covered — of increased U.S. aluminum production, rising employment and increased demand.

The result is a set of planned restarts and capacity expansions in primary and downstream aluminum sectors that will create more than 3,000 new jobs. 

For most of the last decade, America’s aluminum industry struggled due to massive amounts of excess production in China, Russia, India and the Persian Gulf states. Government subsidies and state-directed financing for these countries’ aluminum industries created unfair advantages at the expense of U.S. producers.

As a result, smelters across America’s heartland were forced to idle or shutter production. Between 2010 and 2017, 18 of America’s 23 domestic aluminum smelters shut down, eliminating roughly 13,000 U.S. jobs. 

The Section 232 aluminum tariffs imposed by the Trump administration have prevented America’s aluminum sector from disappearing entirely and have helped thousands of workers that the industry employs.

However, some groups that represent steel-intensive and aluminum-consuming industries remain vocal in their opposition to the tariffs. For years, these companies relied on artificially cheap inputs thanks to dumped and massively subsidized imports of both steel and aluminum. Now, they are objecting when America’s domestic producers are finally being given a level playing field.   

There are some egregious misunderstandings, though, as to the impact of the tariffs. But the real consideration is that aluminum’s pricing in the overall cost of many finished products is vanishingly small. That helps to explain why claims of adverse effects are so often wrong. 

For example, the Beer Institute has claimed that a 10-percent aluminum tariff would cost more than 20,000 jobs in the industry and lead to hundreds of millions of dollars in lost revenue. But the institute’s own data shows that aluminum used in beverage cans represents at most 5.7 percent of the manufacturers’ cost.

Thus, the 10-percent aluminum tariffs will add less than six-tenths of 1 percent to beer producers’ total production costs. Such a minute increase is trivial for an industry that spends tens of billions of dollars annually on advertising.

But the data is also very clear — the industry hasn’t shed 20,000 jobs as predicted. In fact, since the tariffs have been implemented, employment in the beer, wine, and distilled spirits industry has actually increased.

The 232 tariffs have set the aluminum and steel industries on a path to recovery and revitalization, and the U.S. primary aluminum industry is projected to grow by 67 percent over the next year. More encouraging is that seven remaining aluminum smelters will be back in operation by early 2019.

Simply put, the tariffs have restored the U.S. aluminum industry and created thousands of American jobs. Washington should recognize such progress because, without the tariffs, such newfound prosperity could easily disappear.  

Robert E. Scott is a senior economist and director of trade and manufacturing policy research at the Economic Policy Institute (EPI). EPI has conducted research and analysis for the Alliance for American Manufacturing (AAM), Wiley Rein LLP and Century Aluminum.