Last week, President Joe Biden announced a sizable tariff hike on Russian metals, minerals, and chemicals. Most notably, the tariff on Russian aluminum will increase to a whopping 200%.
Biden’s Proclamation on Adjusting Imports of Aluminum Into the United States insists that this tariff hike will punish Russia for invading Ukraine and strengthen America’s national security. It won’t accomplish either objective. What it will do is worsen US inflation, not just with respect to what—if anything—American manufacturers buy from Russia directly, but because Biden wants our trade partners to implement their own 200% tariffs on Russian aluminum.
The tariff hike on aluminum is just the latest salvo in a trade war that predates Russia’s war on Ukraine. In January 2018, the US found that imports of aluminum were “in such quantities and under such circumstances as to threaten to impair the national security of the United States.” The Trump administration took this assessment as license to slap a 10% tariff on aluminum from Russia and eight other countries under Section 232, a national security provision set out in the 1962 Trade Expansion Act. The US cut deals with allies like Canada, the European Union, and Mexico, leaving Russia as one of a few countries still subject to this tariff.
On March 10, the administration will “adjust” this tariff up on Russian aluminum to 200%. A month later, the 200% tariff will apply to imports from other countries that include “any amount” of aluminum that is smelted in Russia.
This action will stoke the inflation Americans are now experiencing. The same day that the administration announced the tariff hike, the Federal Reserve reported that inflation rose 0.6% in January, and 4.7% year-on-year. The April 10 deadline for other countries to mimic Washington’s tariff hike will make things worse, creating uncertainty in global markets, even if our trade partners don’t follow the US lead. Creating confusion about worldwide tariffs, which are nothing more than taxes, will feed inflation.
This isn’t the first tariff hike on Russian aluminum. The US and its allies reacted to Russia’s invasion of Ukraine by stripping it of Most-Favored Nation treatment under the World Trade Organization (WTO). This meant that Russian aluminum (and other goods) was hit by a higher tariff, on top of which the US then added the 10% Section 232 tariff.
The problem was that this stacked tariff didn’t get the job done. In both 2021 and 2022, US imports of Russian aluminum actually increased. Biden insisted he’d do more. But what, exactly?
US aluminum stocks responded favorably to the Biden’s saber rattling in October. Alcoa’s and Century’s shares rose by 5% and 9%, respectively, on heavy trading. It’s not that these companies could hope to pick up the slack. Rising energy prices, which tally up to 30% of a smelter’s total operating costs, is one impediment. Another is that, as the 2022 US Geological Survey found, the handful of US smelters still in operation account for a mere 20% of the US’s aluminum needs. America’s insatiable appetite for aluminum must necessarily be fed by imports, which means that this tariff hike will punish US manufacturing and, ultimately end user consumption, in sectors that range from aerospace and defense to autos and beer cans.
Another tariff hike will not make Alcoa and Century more competitive. The threat of a ban in October pushed US business to shop alternative suppliers, including China, the world’s largest aluminum producer. This is why the 200% tariff will be rolled out internationally on April 10, the objective aim being to deal with trip up imports from other countries that include “any amount” of aluminum that is smelted in Russia, unless these countries employ a 200% aluminum tariff of their own to punish Moscow.
Even if everything goes according to plan, Biden’s tariff hike will not fix the problem that US aluminum production is “well below the target capacity.” Russia accounts for 3% of American imports of US aluminum. Make no mistake, this tariff hike is not about aiding Ukraine, or strengthening US national security. It’s political theatre.
Biden’s proclamation draws attention to Russia’s “unjustified, unyielding, and unconscionable war against Ukraine.” On the one-year anniversary of this tragedy, the US and its allies should punish Moscow. But this tariff hike is a gimmick. It won’t achieve its objectives, will hurt US end-users and consumers, and will heighten tensions with allies that predate Russia’s war on Ukraine.