The Coming Aluminum War
The Commerce Department last week announced a “dumping” investigation into Chinese aluminum imports. That’s one more sign that the Trump Administration is heading toward a major escalation in trade conflict that would hurt Americans.
Dumping investigations usually start when a company petitions the government, but Tuesday’s action was self-initiated, the first such case in 25 years. Commerce Secretary Wilbur Ross told industry executives that this will accelerate the Administration’s fight against “dumped” goods. In October the Commerce Department imposed duties of 97% to 162% on Chinese-made aluminum foil.
U.S. officials are also dismissing traditional trade dispute channels. On Thursday U.S. Trade Representative Robert Lighthizer decided not to attend a G-20 meeting aimed at reducing global excess steel capacity. The bilateral economic dialogue with China is on hold. In August the U.S. stepped away from a World Trade Organization (WTO) case challenging Chinese subsidies for aluminum production, although it may refile.
Instead, the Trump Administration keeps stacking up unilateral trade cases. The new Commerce investigation concerns common alloy aluminum sheet, which is crucial for industries from construction to home appliances. The U.S. uses 26 billion pounds a year, but domestic makers meet only 8% of that demand.
Tariffs would raise costs for U.S. manufacturers, which would likely lose more jobs than they’d create in the aluminum industry. That’s what happened when George W. Bush raised steel tariffs in 2002.
Higher prices on $600 million worth of aluminum may not have a major effect on the U.S. economy, but it signals the Administration’s willingness to start a trade war. If the Commerce investigation results in anti-dumping duties, Beijing will have a strong case to take to the WTO that could allow China to impose new duties on American goods.
Another Commerce investigation begun in April will determine whether aluminum and steel imports are a national security threat under Section 232 of the Trade Expansion Act. That decision, expected after the U.S. tax debate is finished, could give Mr. Trump significant latitude to raise tariffs.
In this case Mr. Ross’s target would be American allies, since China didn’t even break into the top 10 sources of U.S. steel imports in the first half of 2017. Canada provides 17% of U.S. imports, and Germany, South Korea, Taiwan and Japan are all bigger suppliers than China. Hitting their companies would invite retaliation and undermine U.S. foreign policy.
European Union officials have already said that U.S. farm products would be a priority target in a trade war. In July American farmers wrote to the White House warning about tariff blowback. U.S. officials might consider what’s more important: $600 million in aluminum or $160 billion in agriculture exports?