Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
link to page 1 
Updated October 9, 2018
Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
Since March 2018, the United States has assessed duties of
manufacturing. One U.S. smelter produces primary
10% or more on certain imports of aluminum on national
aluminum of sufficient purity for use in military aircraft.
security grounds. The duties are controversial, with some
In 2017, U.S. production of primary aluminum totaled
Members of Congress questioning whether the duties will
741,000 metric tons, the lowest level since 1951, down
encourage domestic aluminum production and whether they
from 2.6 million metric tons in 2007, according to the U.S.
could adversely affect U.S. industries that use aluminum.
Geological Survey (USGS). U.S. production peaked in
Aluminum Tariff and Other Restrictions
1980 at 4.7 million metric tons, and the United States was
Acting under Section 232 of the Trade Expansion Act (19
the world’s top producer through 2000. In 2017, the United
U.S.C. §1862, as amended), which allows the President to
States accounted for 1.2% of the world’s primary aluminum
levy tariffs and quotas on imports found to threaten or
production.
impair U.S. national security, President Trump signed a
At the end of 2017, Alcoa and Century Aluminum were the
proclamation that imposed a 10% tariff on foreign-made
two remaining operators of primary aluminum smelters in
primary unwrought aluminum and certain semifinished
the United States. In June 2018, Magnitude 7 Metals
aluminum products effective March 23, 2018.
restarted limited production at its primary aluminum
Although aluminum manufactured in certain countries was
smelter, which had been closed since 2016. According to
initially exempted, most exemptions expired on June 1,
USGS, capacity utilization of primary smelters stood at
2018, thereby extending the tariff to key sources of
37% in 2017.
aluminum imports, including Canada, the leading import
Secondary aluminum is produced in two ways. Old scrap is
source of primary unwrought aluminum into the United
recovered from used aluminum cans, auto parts, aircraft,
States. Argentina, which agreed to a quota, and Australia
and other products. New scrap is the leftovers from
are the only two countries that have been permanently
processing wrought aluminum and cast products into
exempted. The tariff has no set expiration date; it can be
consumer or industrial products. Secondary aluminum
removed at any time. On August 10, 2018, the President
accounted for 83% of U.S. aluminum production in 2017.
announced in a tweet he had authorized an increase of the
The United States is now the world’s largest producer of
tariff on aluminum from Turkey to 20%, but he has not yet
secondary aluminum. China ranks second. Unlike primary
signed a Section 232 proclamation putting the higher duty
aluminum production, domestic production of secondary
into effect. The United States has also imposed sanctions on
aluminum has been fairly steady over the past two decades.
Rusal, a Russian aluminum company and the world’s
Causes of Declining Primary Aluminum
largest producer outside China.
Output
Domestic Aluminum Manufacturing
A Department of Commerce investigation of the aluminum
As Figure 1 shows, unwrought aluminum, a light metal, is
industry found that imports and global overcapacity, caused
made in two distinct ways. Primary aluminum production
in part by foreign government subsidies (particularly in
consists of mining bauxite, refining it to produce alumina,
China), have had a substantial negative effect on domestic
and then smelting alumina to yield aluminum.
production of primary aluminum. But it appears that
Figure 1. Aluminum Industry Overview
comparatively high electricity costs have been another
important factor affecting domestic production.
According to the Aluminum Association, electricity can
account for up to 40% of the costs of primary unwrought
aluminum production. For this reason, many U.S.
aluminum smelters were constructed in locations with
access to abundant developed hydropower. U.S. electricity
prices today, however, are generally higher than in many
other countries that produce aluminum. Alcoa and Century
have located their newer smelting operations near low-cost
electricity sources outside the United States. Favored
Source: Figure adapted by CRS from NERA Economic Consulting,
locations for primary smelting include Iceland, Russia, the
Impacts of Potential Aluminum Tariffs on the U.S. Economy, June 2017.
United Arab Emirates, Norway, and Canada. In response to
this and other factors, including exchange rates and labor
Secondary aluminum production uses recycled scrap melted
costs, many domestic facilities have cut back production or
in a smelter. Although secondary aluminum can be
shut down entirely.
substituted for primary aluminum in most uses, primary
aluminum is favored in applications with high quality and
The newest U.S. primary smelter was built nearly 40 years
consistency requirements, such as electronics and aerospace
ago. Primary smelting involves large capital investments—
industry groups estimate the cost of a new smelter at around
https://crsreports.congress.gov
Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
$4.5 billion—and there are no plans to build new primary
rods, and wire to the United States. These are subject to the
smelters in the United States. Because of their age, U.S.
Section 232 tariff.
primary smelters tend to use older, less energy-efficient
Potential Effects
technologies than newer plants in the Middle East and Asia.
The 10% Section 232 aluminum tariff is added to any
The Energy Information Administration estimates
existing U.S. tariffs, which range from zero to 2.6% on
secondary smelters use only 6% of the energy required by
primary aluminum and zero to 6.5% on semifinished
primary smelters; they mainly use natural gas and liquefied
aluminum. The tariff on secondary aluminum is zero. The
petroleum gas rather than electricity. The cost of scrap
United States also imposes antidumping and countervailing
represents 80% to 85% of total costs for producers of
duties on certain aluminum imports from China.
recycled aluminum. In addition, the capital costs of
The 10% tariff may raise the price of imported aluminum,
secondary smelters are much lower than those of primary
which could encourage domestic manufacturers to restart
smelters. These factors help explain the attractiveness of
idled capacity. Before the tariff, the average spot price of
producing secondary aluminum in the United States even as
primary aluminum ingot produced in the United States was
production of primary aluminum has declined.
Aluminum Industry Jobs and Wages
$2,167 per metric ton in 2017, or 10% higher than the
London price (the global price of aluminum). The price
Aluminum manufacturing employed 58,100 workers in
effect of the tariff is still unclear. From January to July
2017, according to the Bureau of Labor Statistics. Of these,
2018, the average price of primary aluminum in the United
factory jobs in primary and secondary aluminum production
States rose 3%, according to USGS. Secondary ingot prices
totaled 12,952 in 2017, down from 16,683 in 2013. The
tend to be slightly higher than the London primary price,
remainder are employed in plants that make rolled or
and secondary scrap prices are generally the lowest price of
extruded products, which can be made from primary or
all forms of aluminum.
secondary aluminum. To the extent that the duties under
Domestic demand may shrink if aluminum prices rise,
Section 232 raise the cost of unwrought aluminum
leading some end users to shift to substitute materials such
domestically, this could put domestic producers of
as steel in cars, glass in drink containers, and titanium in
semifinished aluminum products at a disadvantage against
aerospace products. The tariff may also reduce the incentive
imports of these aluminum products.
for domestic aluminum manufacturers to undertake
Primary aluminum workers earned an average wage of
investments in new, more efficient technologies, such as
$80,900 in 2017, higher than the average wage of $66,800
finding ways to reduce the energy required for aluminum
for all U.S. manufacturing workers. The secondary
production or to improve scrap recovery.
aluminum sector paid an average wage of $57,300 in 2017.
Century Aluminum, the main proponent of the tariff and
U.S. Demand for Aluminum Products
chiefly a domestic producer, has responded positively,
Because aluminum is lightweight, ductile, malleable, and
restarting its smelter in Hawesville, KY. Alcoa, the largest
corrosion-resistant, it has many end uses. Demand for
domestic producer with substantial overseas production and
semifinished aluminum in the form of bars, sheets, plates,
an opponent of the tariff, has not restarted any capacity. It
tubes, rods, and forgings is tied to their key end markets.
says the tariff has not been enough of a factor to allow it to
The three main end uses of aluminum are transportation
reopen curtailed capacity. The Aluminum Association, an
equipment, containers and packaging, and construction. The
industry trade group, opposes the global tariff on aluminum,
amount of aluminum required by national defense and
arguing it will raise costs across the aluminum supply
homeland security is small, accounting for 1.7% of total
chain. It has asked for a global forum to discuss aluminum
domestic consumption of aluminum.
excess capacity and a U.S.-Chinese negotiated agreement.
According to USGS, U.S. consumption of aluminum has
If the United States ultimately excludes a sizable number of
grown strongly in recent years. In 2017, consumption
major trading partners from the tariff, it will likely have a
reached 5.9 million metric tons, up 32% from 2013. In
modest impact on the overall level of imports, U.S.
2017, domestic primary aluminum production represented
production, and prices. The proposed United States-
around 13% of total consumption; domestic secondary
Mexico-Canada Agreement maintains the Section 232
production of old scrap accounted for 27% and imports for
aluminum tariff for Canada and Mexico. Under the Section
60%. Secondary aluminum production is limited by the
232 trade action, U.S. companies can petition the
amount of available recycled scrap for remelting and
Department of Commerce to exclude specific imported
refining, so aluminum users have turned to imports to make
aluminum products from the tariffs. The department has
up for the decline in domestic primary supply.
processed or is currently processing over 4,000 product
exclusion requests, including some from Alcoa.
Imported primary aluminum is the fastest-growing source
Representatives of some U.S. firms have testified before
of U.S. supply. Imports of primary unwrought aluminum
Congress that the exclusion process is burdensome, opaque,
came to 4.8 million metric tons in 2017, up 64% from 2007.
and costly.
The United States imports a small amount of secondary
aluminum mainly from Canada and Mexico.
For more information, see CRS Report R45249, Section
232 Investigations: Overview and Issues for Congress,
In 2017, half of U.S. primary aluminum imports were from
coordinated by Rachel F. Fefer and Vivian C. Jones.
Canada. Alcoa operates three primary aluminum smelters in
Canada. Although China accounted for more than half the
Michaela D. Platzer, Specialist in Industrial Organization
world’s primary aluminum production in 2017, it does not
and Business
export aluminum in commodity form to the United States.
China ships semifinished aluminum products such as bars,
IF10998
https://crsreports.congress.gov
Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10998 · VERSION 3 · NEW
Updated October 9, 2018
Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
Since March 2018, the United States has assessed duties of
manufacturing. One U.S. smelter produces primary
10% or more on certain imports of aluminum on national
aluminum of sufficient purity for use in military aircraft.
security grounds. The duties are controversial, with some
In 2017, U.S. production of primary aluminum totaled
Members of Congress questioning whether the duties will
741,000 metric tons, the lowest level since 1951, down
encourage domestic aluminum production and whether they
from 2.6 million metric tons in 2007, according to the U.S.
could adversely affect U.S. industries that use aluminum.
Geological Survey (USGS). U.S. production peaked in
Aluminum Tariff and Other Restrictions
1980 at 4.7 million metric tons, and the United States was
Acting under Section 232 of the Trade Expansion Act (19
the world’s top producer through 2000. In 2017, the United
U.S.C. §1862, as amended), which allows the President to
States accounted for 1.2% of the world’s primary aluminum
levy tariffs and quotas on imports found to threaten or
production.
impair U.S. national security, President Trump signed a
At the end of 2017, Alcoa and Century Aluminum were the
proclamation that imposed a 10% tariff on foreign-made
two remaining operators of primary aluminum smelters in
primary unwrought aluminum and certain semifinished
the United States. In June 2018, Magnitude 7 Metals
aluminum products effective March 23, 2018.
restarted limited production at its primary aluminum
Although aluminum manufactured in certain countries was
smelter, which had been closed since 2016. According to
initially exempted, most exemptions expired on June 1,
USGS, capacity utilization of primary smelters stood at
2018, thereby extending the tariff to key sources of
37% in 2017.
aluminum imports, including Canada, the leading import
Secondary aluminum is produced in two ways. Old scrap is
source of primary unwrought aluminum into the United
recovered from used aluminum cans, auto parts, aircraft,
States. Argentina, which agreed to a quota, and Australia
and other products. New scrap is the leftovers from
are the only two countries that have been permanently
processing wrought aluminum and cast products into
exempted. The tariff has no set expiration date; it can be
consumer or industrial products. Secondary aluminum
removed at any time. On August 10, 2018, the President
accounted for 83% of U.S. aluminum production in 2017.
announced in a tweet he had authorized an increase of the
The United States is now the world’s largest producer of
tariff on aluminum from Turkey to 20%, but he has not yet
secondary aluminum. China ranks second. Unlike primary
signed a Section 232 proclamation putting the higher duty
aluminum production, domestic production of secondary
into effect. The United States has also imposed sanctions on
aluminum has been fairly steady over the past two decades.
Rusal, a Russian aluminum company and the world’s
Causes of Declining Primary Aluminum
largest producer outside China.
Output
Domestic Aluminum Manufacturing
A Department of Commerce investigation of the aluminum
As Figure 1 shows, unwrought aluminum, a light metal, is
industry found that imports and global overcapacity, caused
made in two distinct ways. Primary aluminum production
in part by foreign government subsidies (particularly in
consists of mining bauxite, refining it to produce alumina,
China), have had a substantial negative effect on domestic
and then smelting alumina to yield aluminum.
production of primary aluminum. But it appears that
Figure 1. Aluminum Industry Overview
comparatively high electricity costs have been another
important factor affecting domestic production.
According to the Aluminum Association, electricity can
account for up to 40% of the costs of primary unwrought
aluminum production. For this reason, many U.S.
aluminum smelters were constructed in locations with
access to abundant developed hydropower. U.S. electricity
prices today, however, are generally higher than in many
other countries that produce aluminum. Alcoa and Century
have located their newer smelting operations near low-cost
electricity sources outside the United States. Favored
Source: Figure adapted by CRS from NERA Economic Consulting,
locations for primary smelting include Iceland, Russia, the
Impacts of Potential Aluminum Tariffs on the U.S. Economy, June 2017.
United Arab Emirates, Norway, and Canada. In response to
this and other factors, including exchange rates and labor
Secondary aluminum production uses recycled scrap melted
costs, many domestic facilities have cut back production or
in a smelter. Although secondary aluminum can be
shut down entirely.
substituted for primary aluminum in most uses, primary
aluminum is favored in applications with high quality and
The newest U.S. primary smelter was built nearly 40 years
consistency requirements, such as electronics and aerospace
ago. Primary smelting involves large capital investments—
industry groups estimate the cost of a new smelter at around
https://crsreports.congress.gov
Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
$4.5 billion—and there are no plans to build new primary
rods, and wire to the United States. These are subject to the
smelters in the United States. Because of their age, U.S.
Section 232 tariff.
primary smelters tend to use older, less energy-efficient
Potential Effects
technologies than newer plants in the Middle East and Asia.
The 10% Section 232 aluminum tariff is added to any
The Energy Information Administration estimates
existing U.S. tariffs, which range from zero to 2.6% on
secondary smelters use only 6% of the energy required by
primary aluminum and zero to 6.5% on semifinished
primary smelters; they mainly use natural gas and liquefied
aluminum. The tariff on secondary aluminum is zero. The
petroleum gas rather than electricity. The cost of scrap
United States also imposes antidumping and countervailing
represents 80% to 85% of total costs for producers of
duties on certain aluminum imports from China.
recycled aluminum. In addition, the capital costs of
The 10% tariff may raise the price of imported aluminum,
secondary smelters are much lower than those of primary
which could encourage domestic manufacturers to restart
smelters. These factors help explain the attractiveness of
idled capacity. Before the tariff, the average spot price of
producing secondary aluminum in the United States even as
primary aluminum ingot produced in the United States was
production of primary aluminum has declined.
Aluminum Industry Jobs and Wages
$2,167 per metric ton in 2017, or 10% higher than the
London price (the global price of aluminum). The price
Aluminum manufacturing employed 58,100 workers in
effect of the tariff is still unclear. From January to July
2017, according to the Bureau of Labor Statistics. Of these,
2018, the average price of primary aluminum in the United
factory jobs in primary and secondary aluminum production
States rose 3%, according to USGS. Secondary ingot prices
totaled 12,952 in 2017, down from 16,683 in 2013. The
tend to be slightly higher than the London primary price,
remainder are employed in plants that make rolled or
and secondary scrap prices are generally the lowest price of
extruded products, which can be made from primary or
all forms of aluminum.
secondary aluminum. To the extent that the duties under
Domestic demand may shrink if aluminum prices rise,
Section 232 raise the cost of unwrought aluminum
leading some end users to shift to substitute materials such
domestically, this could put domestic producers of
as steel in cars, glass in drink containers, and titanium in
semifinished aluminum products at a disadvantage against
aerospace products. The tariff may also reduce the incentive
imports of these aluminum products.
for domestic aluminum manufacturers to undertake
Primary aluminum workers earned an average wage of
investments in new, more efficient technologies, such as
$80,900 in 2017, higher than the average wage of $66,800
finding ways to reduce the energy required for aluminum
for all U.S. manufacturing workers. The secondary
production or to improve scrap recovery.
aluminum sector paid an average wage of $57,300 in 2017.
Century Aluminum, the main proponent of the tariff and
U.S. Demand for Aluminum Products
chiefly a domestic producer, has responded positively,
Because aluminum is lightweight, ductile, malleable, and
restarting its smelter in Hawesville, KY. Alcoa, the largest
corrosion-resistant, it has many end uses. Demand for
domestic producer with substantial overseas production and
semifinished aluminum in the form of bars, sheets, plates,
an opponent of the tariff, has not restarted any capacity. It
tubes, rods, and forgings is tied to their key end markets.
says the tariff has not been enough of a factor to allow it to
The three main end uses of aluminum are transportation
reopen curtailed capacity. The Aluminum Association, an
equipment, containers and packaging, and construction. The
industry trade group, opposes the global tariff on aluminum,
amount of aluminum required by national defense and
arguing it will raise costs across the aluminum supply
homeland security is small, accounting for 1.7% of total
chain. It has asked for a global forum to discuss aluminum
domestic consumption of aluminum.
excess capacity and a U.S.-Chinese negotiated agreement.
According to USGS, U.S. consumption of aluminum has
If the United States ultimately excludes a sizable number of
grown strongly in recent years. In 2017, consumption
major trading partners from the tariff, it will likely have a
reached 5.9 million metric tons, up 32% from 2013. In
modest impact on the overall level of imports, U.S.
2017, domestic primary aluminum production represented
production, and prices. The proposed United States-
around 13% of total consumption; domestic secondary
Mexico-Canada Agreement maintains the Section 232
production of old scrap accounted for 27% and imports for
aluminum tariff for Canada and Mexico. Under the Section
60%. Secondary aluminum production is limited by the
232 trade action, U.S. companies can petition the
amount of available recycled scrap for remelting and
Department of Commerce to exclude specific imported
refining, so aluminum users have turned to imports to make
aluminum products from the tariffs. The department has
up for the decline in domestic primary supply.
processed or is currently processing over 4,000 product
exclusion requests, including some from Alcoa.
Imported primary aluminum is the fastest-growing source
Representatives of some U.S. firms have testified before
of U.S. supply. Imports of primary unwrought aluminum
Congress that the exclusion process is burdensome, opaque,
came to 4.8 million metric tons in 2017, up 64% from 2007.
and costly.
The United States imports a small amount of secondary
aluminum mainly from Canada and Mexico.
For more information, see CRS Report R45249, Section
232 Investigations: Overview and Issues for Congress,
In 2017, half of U.S. primary aluminum imports were from
coordinated by Rachel F. Fefer and Vivian C. Jones.
Canada. Alcoa operates three primary aluminum smelters in
Canada. Although China accounted for more than half the
Michaela D. Platzer, Specialist in Industrial Organization
world’s primary aluminum production in 2017, it does not
and Business
export aluminum in commodity form to the United States.
China ships semifinished aluminum products such as bars,
IF10998
https://crsreports.congress.gov
Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10998 · VERSION 3 · NEW