Claiming that Canada was taking advantage of the United States, President Trump issued a Proclamation reinstating 10% tariffs on specific aluminum products imported from Canada. In turn, Canada has now proposed to impose 10% tariffs on imports of aluminum and aluminum-containing products from the United States. If this occurs, it could lead to a broader trade war between the two countries.
In January 2018, the Trump administration determined that imports of steel and aluminum threaten to impair U.S. national security. In order to curtail imports of steel and aluminum, effective June 1, 2018, the Trump administration imposed tariffs of 25% for steel imports and 10% for aluminum imports, including imports from Canada. While the U.S. and Canada had previously reached an agreement in May 2019 that led to the removal of Section 232 tariffs on all steel and aluminum imports from Canada, the agreement allowed the administration to continue to monitor imports from Canada and reinstate the tariffs if further action was necessary.
II. Reinstatement of 10% Tariffs on Specific Products
Through this monitoring, the Department of Commerce determined that imports of non-alloyed unwrought aluminum from Canada had surged 87 percent during June 2019 through May 2020 compared to the prior 12-month period and exceeded the volume of any full calendar year in the previous decade.
The Proclamation specifically allows for the continued use of any exclusion of aluminum articles from Canada previously granted by the Department of Commerce. Additionally, the Proclamation provides that previously granted exclusions may be renewed. However, the Proclamation does not address whether parties will be able to file new requests for exclusions on imports subject to these reinstated tariffs. The President announced the proclamation while speaking at a Whirlpool plant in Clyde, Ohio, stating that “Canada was taking advantage of us, as usual.” Further, the President stated he took this action as he was advised by the U.S. Trade Representative that the return of the 10% tariff was “absolutely necessary” to protect the U.S. aluminum industry.
The reinstatement of 10% tariffs applies to only a select group of aluminum products: non-alloy unwrought aluminum products that enter under subheading 7601.10 of the Harmonized Tariff Schedules of the United States.
The Proclamation specifically allows for the continued use of any exclusion of aluminum articles from Canada previously granted by the Department of Commerce. Additionally, the Proclamation provides that previously granted exclusions may be renewed. However, the Proclamation does not address whether parties will be able to file new requests for exclusions on imports subject to these reinstated tariffs.
III. Canadian Response
Although Canada acknowledges that one particular type of aluminum product increased, the Canadian government argues that overall aluminum imports from Canada declined. Therefore, Canada disputes the view of the Trump administration that this constitutes a surge under the agreement.
August 7, 2020, Canada responded by imposing what Prime Minister Trudeau categorized as “dollar-for-dollar” retaliatory tariffs on U.S. aluminum and U.S. aluminum-containing products, including products ranging from doors, to bicycles to refrigerators and washing machines. Canadian Deputy Prime Minister Chrystia Freeland stated that the measures were not an escalation but intended to show that “Canada will not back down.”
IV. Beginning of a Trade War?
Given Canada’s response, it remains to be seen whether the current administration will accept Canada’s position or if this action will lead to additional 232 tariffs on other Canadian products. We note that the U.S. Aluminum Association disagrees with the Trump administration’s actions which may temper any further actions. Only time will tell whether calmer heads will prevail or whether this will reignite a trade war between the United States and Canada.