Canada is considering financial support for large aluminum manufacturers to protect the industry from trade tensions with the U.S.
This policy will be activated if the 50% aluminum import tariff from the U.S. continues beyond the medium-term deadline, according to CEO Jean Simard of the Aluminum Association of Canada.
MAIN CONTENT
Canada may provide financial support for large aluminum companies if U.S. tariffs are prolonged.
The 50% import tariff from the U.S. significantly affects Canada's aluminum exports and the U.S. domestic manufacturing sector.
The Canadian government is negotiating with corporations like Rio Tinto to promote investment amid tariff tensions.
Does Canada plan to support large aluminum manufacturers to deal with U.S. tariffs?
Jean Simard, CEO of the Aluminum Association of Canada, confirms that initial discussions are underway to support aluminum companies if the 50% tariff from the U.S. continues to be effective after July 21, 2024.
Simard emphasizes that Canadian aluminum businesses are currently not facing liquidity issues, but prolonged tariffs will put significant pressure on the national financial system. This information is based on reports and direct exchanges among industry leaders.
"If the 50% import tariff continues to apply, financial support is necessary to protect aluminum manufacturers from severe damages."
Jean Simard, CEO of the Aluminum Association of Canada, 06/2024
How do U.S. import tariffs affect Canada's aluminum industry and the U.S. market?
About 50% of aluminum used in the U.S. is imported from abroad, with most coming from Canada, with 3.2 million tons exported to the U.S. in 2023.
President Donald Trump's increase of aluminum and steel import tariffs to 50% to boost domestic production has caused numerous negative impacts for importing businesses, leading to higher input material prices and affecting the construction, transportation, and packaging manufacturing sectors in the United States.
Data from May 2024 from the Institute for Supply Management (ISM) shows that the manufacturing sector has contracted for the third consecutive month, hitting a record low for six months, with job losses and rising energy costs further weakening the industry.
The long-term impact of the 50% import tariff on Canadian businesses
Jean Simard warns that if tariffs last longer, many Canadian aluminum businesses will face more severe liquidity risks, which will impact the country's financial economy.
Canada's Minister of Science, Innovation, and Industry Mélanie Joly has discussed with Rio Tinto about the possibility of financial support to mitigate the negative impact of U.S. tariff policies.
"We are in the process of active discussions to support the Canadian aluminum industry in an unfair tariff environment, promoting investment to develop this industry."
Spokesperson for Minister Mélanie Joly, 06/2024
How does Canada's steel import from the U.S. and other countries affect it?
In addition to aluminum exports to the United States, Canada also imports a large amount of steel from the U.S. and Mexico. About 25% of the steel used in the U.S. is imported, mostly from these two countries. This creates a complex trade link between North American nations.
This trade interaction partly influences tariff policies and causes complex changes in the metal industry in the region.
Is the U.S. tariff policy effective in promoting domestic steel and aluminum production?
The goal of the U.S. government is to stimulate investment and increase the production of steel and aluminum for the domestic construction industry. However, actual aluminum users in the U.S. market are facing high cost pressures as they have to purchase materials on the London Metal Exchange plus shipping costs and tariffs.
The phenomenon of declining sales in the manufacturing sector along with the risk of job loss due to rising costs and material shortages shows that tariff policies are causing many unintended consequences.
Examples and specific data on the impact of U.S. aluminum import tariffs
Content Before 50% Tariff After 50% Tariff Canadian aluminum output exported to the U.S. (million tons/year) 3.2 Significantly reduced (estimated) Purchase price of aluminum in the U.S. physical market (USD/ton) Price on LME + normal shipping costs Increased by an additional 50% import tariff, shipping costs, and additional taxes Impact on U.S. manufacturing sector Stable Contraction, job losses, increased costs
Frequently Asked Questions
How does the Canadian government plan to provide financial support to aluminum companies? Canada is discussing direct financial support to help aluminum businesses cope with the impact of the 50% tariff from the U.S., but no final decision has been made. What is the direct impact of the 50% import tariff on Canada's aluminum industry? Tariffs reduce exports to the U.S., create liquidity pressures, and weaken the finances of related businesses. What is the goal of U.S. tariffs? The goal of the U.S. is to encourage domestic steel and aluminum production, aiming to reduce dependence on imported raw materials. What is the situation of Canada's steel imports from the U.S. and Mexico? Canada imports about 25% of its steel from the U.S. and Mexico, creating a complex trade relationship in the North American region. Are there any other negative impacts of import tariffs? This policy increases raw material costs, reduces the competitiveness of the manufacturing sector, and leads to job losses in the U.S.
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