By Vince Phillips
On Feb. 1, 2021, the United States missed an opportunity to help the U.S. economy. Newly inaugurated President Joe Biden issued a Proclamation stating that the Section 232 tariff on imported aluminum would continue. He did this even as he lifted Trump administration tariffs on other imports.
The president’s rationale was this: “(We) applied tariffs to help ensure the economic viability of the domestic aluminum industry — an industry that the Secretary of Commerce previously identified as essential to our critical industries and national defense. Because robust domestic aluminum production capacity is essential to meet our current and future national security needs, (It) aimed to revive idled aluminum facilities, open closed smelters and mills, preserve necessary skills, and maintain or increase domestic production by reducing United States reliance on foreign producers.”
A noble purpose — helping America meet our own needs. The problem is, the tariff has not worked. The March 11, 2021 report by the Congressional Research Office, “U.S. Aluminum Manufacturing: National Security and Tariffs,” pointed to a 9% reduction in U.S. aluminum industry jobs from 2019 to 2020. While COVID is partly responsible, domestic production declined because it costs more to produce aluminum products due to energy costs and outdated smelting facilities.
World pricing contributed with Chinese subsidies driving the world price down below the U.S. price — making us non-competitive. The CRS report charted the U.S. price of primary aluminum between January to November 2020 as 15% more than the world price. Thus, the U.S. became a magnet for foreign imports of aluminum.
Since the tariff did not stimulate domestic production, what should the U.S. do? A longer-term solution is reducing costs by modernizing aluminum production capability. Realistically, we are not there yet. Instead, we are at a self-imposed competitive disadvantage.
The demand is there. America depends on aluminum as a component of hundreds if not thousands of manufactured products. And there will be more use of aluminum because it does not rust, is lighter and because electric vehicles must be lighter to compensate for the weight of the battery apparatus.
Farm equipment size and technology add weight. Heavier equipment means more soil compression — counterproductive to production. Lighter than steel, aluminum reduces weight. Manufacturers use more aluminum for gear casings, pump housing, equipment covers, cabins, parts for combine harvesters and draw-in rollers, pistons, valve covers and tractor front axles.
Here is the catch-22. On one hand, aluminum is used because it is lighter. But, thanks to protectionist tariffs, American aluminum is more expensive. Protecting one industry hurts another. This tariff hurt Pennsylvania’s No. 1 industry, agriculture. Using domestic aluminum in making farm machinery costs the farmer more.
In addition, countries we tariffed imposed retaliatory tariffs on our agricultural exports. The USDA reported that in 2018 and 2019, U.S. agricultural exports lost at least $27 billion because of retaliatory tariffs from those countries, particularly China. USDA’s Economic Research Service January 2022 study, The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture, showed that PA lost between $20-40 million of dairy exports and up to $5 million each for corn, fresh fruits and tobacco. Pennsylvania fared better than some others like Illinois which lost $1.25 billion in soybean exports. Thankfully, the market largely recovered because of further Chinese-U.S. negotiations.
Most recently, on Dec. 9, 2022, the World Trade Organization decided that the U.S. violated international trading rules by imposing tariffs on steel and aluminum imports. The U.S. filed an appeal, saying that the protection of U.S. steel and aluminum is a matter of national security.
Farmers recognize the overall importance of national security but see the effects of the tariff differently. Farmers beset by escalating input costs of items like fertilizer and energy — or farm equipment made more costly because of the aluminum tariff should be saying “Wait a minute. sn’t American food security also a matter of national security? Get rid of that tariff!”
(Vince Phillips, of Mechanicsburg, Pennsylvania, is a retired agricultural lobbyist after 31 years of advocacy in Harrisburg.)
