President Donald Trump officially signed an executive order on Thursday (April 27) afternoon to initiate a Section 232(b) investigation into aluminum imports. Overseen by the Commerce Department, the investigation will determine whether foreign imports of aluminum threaten national security - and if so, Trump will have the power to act to restrict imports, including through tariffs.
The Commerce Department has 270 days to conduct the investigation. Once it gives its recommendation to Trump, he will have 90 days to respond.
There's little doubt that American aluminum makers are threatened because of China's aluminum overcapacity. Chinese state-owned enterprises produce far more aluminum than China can use for its own needs. Instead of curbing production, China dumps its excess aluminum (which, we note, is heavily subsidized) into the U.S. market priced far below market cost.
It's part of a strategy to capture market share and put American aluminum makers out of business. Over the past 15 years, China's aluminum production quintupled, from 11 percent of the world's production in 2002 to 53 percent in 2016; imports took 55 percent of the market in 2016.
Meanwhile, eight American smelters have closed or curbed production since 2015. Only two are fully operational today. There is only one remaining American smelter capable of producing the high-purity aluminum needed by the aerospace industry for F-35, F-18 and C-17 aircraft, Commerce Secretary Wilbur Ross told reporters during a Wednesday briefing.
Alliance for American Manufacturing President Scott Paul said that the investigation could be a step toward recovery for the blue-collar aluminum industry workers impacted by China's unfair trade practices.
'If we're to see real change, this investigation must be followed by appropriate trade enforcement,' he said. 'For years, China has promised to cut its massive industrial overcapacity, all while increasing production… If China is unwilling to keep its promises, there should be clear and enforceable penalties to force actions.'
Trump's executive order earned bipartisan support, including from Ohio Sen. Sherrod Brown (D), who noted in a statement that 15,000 American aluminum workers have lost their jobs in the last decade. But Brown also cautioned that the investigation must lead to action.
'It's good that the Administration is using this tool, but what matters to Ohio workers and the aluminum supply chain is whether it leads to real relief and action against China's market-distorting policies,' Brown said.
Heidi Brock, president and CEO of the Aluminum Association, said in a statement that Trump's executive action 'recognizes the value of U.S. aluminum industry.' United Steelworkers President Leo Gerard, whose union represents thousands of aluminum industry workers, said any action stemming from the investigation should focus 'on those countries that are actually breaking the rules.'
He named names. 'China's overcapacity is swamping world markets, driving down prices and making some operations unprofitable,' he said.
While Section 232 investigations are rare, this is now the second time that Trump has opted to initiate one; he announced a Section 232 investigation into steel imports on April 20.
But as our Scott Paul noted last week, China's industrial overcapacity and persistent unfair practices - coupled with the need to maintain a strong industrial supply chain for our national security needs - mean such action is appropriate.
'America's steelmakers are vital to our national security, providing essentials ranging from the armor plate on our tanks and specialty metals in our high-tech aircraft, to the hulls of our battleships and everything in between,' Paul said. 'China's massively subsidized and grossly over-scaled steel industry is an existential threat to our own domestic makers.'
Note EU-Digest: Once again this Trump executive order is probably not only worth the paper it is written on but also in conflict with established rules of the World Trade organization. But also contradictory as to the actual situation of the US Aluminum Industry .
How would this order be applied to US Aluminum giant Alcoa, which has operations in Australia, Brasil, Canada, Guinea, Iceland, Norway, Saudi Arabia Spain and Suriname (Alcoa is presently in a negotiation phase with the government, as Alcoa winds down its operations there)? Nevertheless,would these subsidiary, or partner companies of Alcoa, also be seen as "foreign competition", which in a geographical sense they are.
Once again. it looks like the Trump administration only used this "Executive Order" signing ceremony today, April 27, surrounded by CEO's of the US aluminum industry, "to investigate Aluminum Imports", as a PR photo opportunity.