Despite the trade war, the US aluminum industry is still suffering

In 2017, the U.S. aluminum industry was, in the words of a report by the Economic Policy Institute, “hanging by a thread.”  

In just seven years, 18 of 23 domestic smelters had closed, and only two of the five remaining plants operated at full capacity. Employment within the industry dropped 58 percent. The U.S. was down to a single refinery of alumina, the compound from which the metal is made, and we were importing five times as much primary aluminum as we produced.  

Tariffs imposed during the Trump administration and largely continued by President Joe Biden have arrested the decline, but more needs to be done. The aluminum industry is still using only about half its capacity, and reliance on imports is jeopardizing national security. Aluminum is an essential component of aerospace and defense products, including armor plates, naval ships, artillery, torpedoes, mines, machine guns, body armor and key parts for aircraft like the F-18, F-35 and C-17.  

As the U.S. industry was collapsing in the last decade and good jobs were being lost, demand for aluminum was growing throughout the world, up 50 percent between 2011 and 2018. Who was meeting that demand? China, India, Russia and the Gulf Cooperation Council countries — thanks in large measure to government subsidies and forced labor. China and India, especially, use huge quantities of coal for aluminum production, which generates an outsized contribution to the world’s carbon dioxide emissions.  

In fact, with massive overcapacity, these countries were flooding the world with aluminum, putting competitors out of business — and doing the same with steel. 

I wrote in 2016 that, even as someone who believes in trade that’s as free as possible, “I’m appalled at what’s happening with aluminum.” We faced “the obliteration of an American industry that’s flourished for more than a century.” The government had to do something. 

And the new administration did. Using his authority under Section 232 of the Trade Expansion Act of 1962, which calls for trade restrictions to protect national security, President Trump imposed 10 percent tariffs on all aluminum imports, except those coming from North America. (Tariffs of 25 percent were imposed on steel at the same time.) The results were quickly beneficial. Smelters were restarted, production increased, jobs returned. 

But it was not enough. Five years later, the U.S., which was the leading producer in the world in 2000, is still just a minor manufacturer of primary aluminum, a high-quality metal that is manufactured from raw materials rather than scrap. According to an October Congressional Research report, China accounted for 57 percent of global production in 2021. India was second at 6 percent; Russia was third at 5 percent; the U.S. was tied with Iceland at 1 percent in ninth place. 

Research by the Organization for Economic Cooperation and Development (OECD), the organization of major economies, found that the large firms representing half of the global smelting capacity had received $70 billion in government support over four years. The overwhelming amount of that support was provided by Gulf Cooperation countries, India and China.   

Trying to match these nations’  financial and energy subsidies is not the answer, but the U.S. has to take measures to rebuild our own aluminum industry — which the Department of Homeland Security classifies as a “critical manufacturing sector.”  

The Biden administration removed tariffs from European Union and United Kingdom imports, replacing them with what are called “tariff-rate quotas,” which set limits on how much aluminum can be shipped here. Concerns rose that Section 232 would be rolled back elsewhere or quotas relaxed. But in December, the Office of the U.S. Trade Representative reaffirmed that the White House was “committed to preserving U.S. national security by ensuring the long-term viability of our steel and aluminum industries, and we do not intend to remove the Section 232 duties” despite objections from the World Trade Organization. 

The Biden administration needs to stick to current policy on Section 232 and indeed take other steps, such as toughening standards on granting exclusions to the current tariffs for companies and countries and aggressively applying anti-dumping laws. The White House should consider going even further by restricting import volumes from the rest of the world while leaving tariffs intact.  

Members of Congress, meanwhile, have also taken important actions to bolster our domestic aluminum industry. By passing the bipartisan Infrastructure Investment and Jobs Act and the Inflation Reduction Act, lawmakers have increased the demand for high-quality aluminum, a critical component in green energy infrastructure. Washington must take additional steps to prioritize domestic aluminum production through tax incentives, grants and loans. 

The job isn’t done yet. CRS reports that in 2021, “U.S. primary aluminum smelters operated at 55 percent of the industry’s rated production capacity.” That compares with 88 percent globally. The purpose of the Section 232 tariffs was “to enable U.S. aluminum production to utilize an average of 80 percent of production capacity.” We are far from that. 

Section 232 tariffs have no doubt helped, but they still haven’t resolved the economic and national security threats created by dependence on aluminum produced far from our shores. We can’t let the Chinese win. We can’t let this important industry decline and die. 

Ambassador (ret.) James K. Glassman was undersecretary of State for Public Diplomacy and Public Affairs in the George W. Bush administration.