A new EPI report finds that U.S. Section 232 import measures—which imposed a 10% tariff and other trade remedies on aluminum imports starting in 2018—boosted U.S. aluminum production, employment, and capital investment. Further, the measures created no adverse effects for aluminum-consuming industries such as motor vehicle parts, construction goods, and canned beverages.
The report explains that the U.S. aluminum industry was hanging by a thread in 2017 in the face of massive global overcapacity in aluminum production—driven by subsidies and other anti-competitive policies in China and other nations—that flooded U.S. and global markets with exports and undercut prices.
In response, the United States implemented aluminum import restraints under Section 232 of the Trade Expansion Act of 1962, finding that depressed global prices posed material harm to the U.S. aluminum industry by pushing producers to the brink of financial viability and undermining national security. Currently there is only one operating U.S. smelter capable of producing high-purity aluminum required for military and aerospace applications—and it is the only one in a NATO country.
“Domestic aluminum production is essential for national defense and critical to the broader economy,” said Adam S. Hersh, EPI visiting economist, and co-author of the report. “The Biden-Harris administration should continue and strengthen aluminum import restraints until it can achieve a permanent, multilateral solution to the chronic problem of excess global aluminum production capacity.”
In the two years from the March 2018 implementation of the Section 232 aluminum import measures to the February 2020 pre-COVID-19 economic peak, U.S. production of primary aluminum increased by 37.6% compared with the preceding two-year period. Further, domestic producers of both primary aluminum and downstream aluminum products have made commitments to create thousands of jobs and invest billions of dollars in aluminum production.
“Chronic global aluminum overcapacity risks the U.S. industry’s ability to maintain operations, grow, and invest in areas essential to national security and broader economic welfare,” said Robert E. Scott, EPI senior economist and director of trade and manufacturing policy research, and co-author of the report. “Maintaining the Section 232 aluminum import measures remains critical to stabilizing and expanding U.S. aluminum production.”