A new report shows the US-imposed aluminum tariffs are actually benefiting China, which remains one of America’s largest trade partners.
After announcing that another round of tariffs on an additional US$16 billion in Chinese goods will come into effect on August 23, a new report shows the existing US-imposed aluminum tariffs are actually benefiting the Asian nation.
The tariffs, which were first implemented earlier this summer, add an additional 10 percent on aluminum imports to America. While China is subject to the same aluminum tariffs as other global leaders, the country, which remains one of America’s largest trade partners, is in a better position to absorb the effects of the tariffs compared to other aluminum-producing countries.
Aluminum is a key manufacturing material used in everything from automobiles to soup cans, making it a versatile and valuable commodity.
The new tariffs were meant to help American producers remain competitive in their own market; however, it seems the Trump-imposed levies are doing the opposite.
Last week, Alcoa (NYSE:AA), America’s largest aluminum company, filed for an aluminum tariff exemption with the US Department of Commerce. The industrial metals producer wants to import 40,000 MT of aluminum from Canada to produce beverage cans.
“Alcoa Warrick currently imports the slabs from Alcoa’s Canadian affiliate, Alcoa Canada, which has the capability and capacity to produce slabs, meeting Alcoa’s exact proprietary alloy and dimensional requirements,” reads part of the application. “Alcoa is not capable of producing in-house a substitute product for the slabs, and therefore, relies exclusively on imports of these slabs from Canada.”
Alcoa’s petition is just one of thousands from American companies pleading with their government to offer them relief.
Chinese and US aluminum producers are actually getting the nicer deal for now. The Trump administration has doubled the tariff on the industrial metal for Turkey, creating a 20-percent tax on imports of aluminum from the Eastern European country.
Russia isn’t safe either. Rusal (HKEX:0486), a global supplier of aluminum, has come under fire from the Trump government, which issued a statement giving Rusal’s US customers until October 23 to cut business ties with the Russian company.
While international tariffs have somewhat leveled the field, China still remains in an optimal position to benefit from the tariffs.
For example, in June, global aluminum output was 5.321 million tonnes — a 2.2-percent decrease from the previous month. Despite the reduction, China’s aluminum output, which accounts for more than 50 percent of the global total, ramped up to 2.83 million tonnes in June. That represents a 1.6-percent month-over-month increase.
Meanwhile, China’s exports of unwrought aluminum and products surged to the second-highest level on record in July, coming in at 519,000 tonnes. That shows US tariffs are not hurting Chinese exports yet, according to Reuters.
China has continued to reap the rewards of low production costs and well-maintained inventories — all reasons the Asian nation will not be as negatively impacted by the aluminum tariffs as other countries.
Late last week, China issued its own retaliatory tariffs on the same goods America is set to tariff later this month, fueling this ongoing tariff and toil cycle.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.