US media: Limited effect, US reluctantly opens up aluminum tariffs

The White House had hoped to boost domestic aluminum production capacity with a 50% import tariff, but now, with soaring aluminum prices and limited production increases, it has turned to high tariffs as an opening. According to Bloomberg on the 20th, US President Trump signed a statement introducing an investment incentive plan for primary aluminum production. As long as enterprises build, expand or renovate aluminum smelters in the United States and obtain government approval, a preferential tax rate of about 25% can be applied to some imported raw aluminum, which is halved from the current tax rate.

The White House announced that companies need to submit production return plans to the US Department of Commerce. After the plan is approved, the enterprise where the project is located is allowed to import the same amount of primary aluminum as the expected annual output of the new project every year, and pay import tariffs at half the applicable tariff rate in accordance with Article 232 of the Trade Expansion Act of 1962. This provision allows the President of the United States to take adjustment measures against imported products deemed to pose a threat to national security. In order to increase domestic production capacity in the United States, in June last year, the US raised tariffs on steel and aluminum products imported from all trading partners except the UK from 25% to 50%. Bloomberg reported that this measure has only achieved sporadic results, and multiple countries have been lobbying the United States to lower tariffs.

Reuters reported that this new policy adopted the proposal of US Commerce Secretary Lutnick. Lutnik believes that the current production and supply of primary aluminum in the United States are still insufficient to meet the needs of the economy and defense industry, and it is necessary to adjust the tariff system to promote domestic primary aluminum production and supply. He suggested providing incentives for companies that build new primary aluminum production facilities, expand existing facilities, or renovate old facilities in the United States to increase production capacity and efficiency.

Although Trump did not specify the specific background of the new policy, Lutnik emphasized the basic needs of the defense industry. According to a report by Yonhap News Agency, the tariff adjustment may be related to the soaring aluminum prices caused by the US Iran conflict, as well as the need for the US to ensure the supply of aluminum materials needed for military production. According to White House sources cited by Agence France Presse, aluminum is an important material required for the production of military equipment such as armored vehicles, naval vessels, and missiles in the United States.

Bloomberg reported that at present, the primary aluminum production capacity in the United States is insufficient to meet domestic demand and highly relies on imported supplies from Canada and the Middle East. Currently, there are only four aluminum plants still operating in the United States, compared to 23 in 2000. In addition, high tariffs have significantly increased the raw material costs for American manufacturing companies. Bloomberg reported that since the 50% aluminum tariff came into effect last year, the important indicator of US aluminum procurement costs, the "Midwest premium," has significantly increased. The supply shock caused by the US Iran conflict has further intensified market tension, driving up aluminum premiums in the region by nearly 100%.

Some analysts point out that this adjustment highlights the dilemma of the US aluminum industry policy. On the one hand, Washington hopes to promote industrial return through high tariffs; On the other hand, due to the slow recovery of domestic production capacity, the United States still cannot do without imported aluminum supply in the short term. The granting of tariff preferences to some companies this time also reflects that the reconstruction of the US aluminum industry is still difficult to make significant progress in the short term.