Donald Trump, the President of the United States, has announced plans to impose tariffs on key metals like copper and aluminum, sparking concerns about rising costs in the U.S. manufacturing industry. Meanwhile, the U.S. metal production industry welcomes the tariffs but acknowledges that time is needed to become competitive.
According to Reuters on the 26th local time, President Trump planned to impose a 25% tariff on steel and aluminum from the 12th of next month. He also ordered an investigation into U.S. copper imports through an executive order, suggesting the possibility of imposing tariffs on copper.
Reuters, citing analysts, evaluated that if the U.S. imposes tariffs on copper, the industry will face significant losses due to increased costs before reviving copper mining and refining takes time.
Data from the U.S. Geological Survey (USGS) shows that the U.S. imports nearly half of its domestic copper demand from countries like Chile, Canada, and Mexico, with domestic production having decreased by about 11% since 2021. Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, stated that increasing domestic production soon is unlikely and compared the situation to scoring an own goal.
According to the Wall Street Journal (WSJ), U.S. companies manufacturing products like cans, window frames, and automobile parts using aluminum have expressed concerns about rising costs following President Trump’s tariff announcement. A representative from an auto parts company mentioned plans to increase purchases of U.S. aluminum but noted that domestic prices are also rising.
In contrast, the U.S. aluminum production industry is optimistic about the tariffs. Competing against low-priced imported aluminum, the industry believes that imposing tariffs on foreign products will improve performance and help expand domestic production.
Data from the American Aluminum Association indicated that nearly 60% of aluminum consumption in the U.S. in 2023 was imported. The industry has expressed dissatisfaction that nearly 75% of these imports are tariff-free. An aluminum company representative stated that they have an opportunity to compete without tariff exemptions, mentioning a 40% decline in sales of U.S. aluminum extrusion products over the past five years due to low-cost Mexican products.
However, the problem is the lack of smelters producing high-purity aluminum, making it difficult to immediately increase production. Due to electricity cost burdens, the number of operational smelters in the U.S. has decreased from 23 in 2000 to 7 in 2020, with only 4 currently operating. Last year, U.S. primary aluminum production hit its lowest since 1950, with Canada supplying 75% of U.S. demand due to its cheaper electricity costs.
While supporting the 25% tariff, the American Aluminum Association has requested a temporary tariff exemption on Canadian primary aluminum, arguing that constructing new smelters and expanding the power grid in the U.S. will take at least 10 years. The association proposed continuing trade with Canada until U.S. smelter capacity and operations can be increased.
Similarly, the copper industry in the U.S. faces supply shortages, with only two operational smelters and more than two years required to build new ones, according to Reuters.
[Photo Source: Reuters=Yonhap News]
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