Foiled Again

Trump's aluminum tariff is self-defeating

The craziest Trump tariff is actually the one on aluminum. It is essentially a tariff on electricity. Huge amounts of electricity are required for the electrolysis process used to produce aluminum from aluminum oxide, one of the world's most common minerals. That's why smelters are usually located adjacent to power plants or in places like Quebec and British Columbia with abundant hydroelectricity. A few are near nuclear power plants.

According to the Al Circle newsletter:

Once a global leader in aluminum production, the US now produces just 1.2 per cent of the world’s aluminum supply. According to the US Geological Survey (USGS), the US had a primary aluminum production capacity of 1.36 million tonnes in 2024, but only half of that capacity was in use, producing a mere 680,000 tonnes. To put this in perspective, the US imported over 4.8 million tonnes of crude and semi-manufactured aluminum products last year — and Canada alone supplied 2.6 million tonnes of that total.

Most domestic US aluminum production is recycled from scrap, which uses only five percent as much energy as primary smelting. The US is the world’s third-largest importer of scrap, after India and China, and the country is also a significant exporter. However, most recycled aluminum is not as pure as the newly smelted metal, and it is generally used for less critical products like construction materials and consumer products.

Unfortunately, most of the world's primary aluminum is produced in Asia using coal-fired power from dirty grids that are major sources of greenhouse gas emissions. The largest global producers are China (59 percent) and India (6 percent). Next comes Russia (5 percent), then Canada and the UAE (4 percent each), and no one else accounts for more than 2 percent.

There has been some shift globally toward hydro, other renewables, and nuclear power for aluminum production, but China and India still get more than 80 percent of the power from coal. Russia, Canada, and northern Europe use more than 90 percent hydroelectricity. The UAE uses natural gas-fired power.

Repatriating primary aluminum production to the US would add another enormous power demand to a grid already straining to meet the fast-growing demand for AI computing, cloud data storage, cryptocurrency production (!), electric vehicles, heat pumps, etc.

The supposed “security” justification for the tariff is to ensure aluminum supplies for aerospace and other critical defense industries. What is the point of putting high tariffs on supplies from a next-door ally that has proven that it can meet half of your country’s external demand using cheap, reliable, renewable hydroelectricity? It seems like shooting a shiny bullet into your foot.