UPDATE: Sept. 16, 2020: The U.S. reversed its decision to impose aluminum tariffs on imports from Canada, backdated to Sept. 1, according to a statement from the Office of the U.S. Trade Representative. USTR cited an expected decline in Canadian aluminum imports as the reason for the decision.

"If imports exceed 105 percent of the expected volume in any month the United States may re-impose the 10 percent tariff going forward," USTR said.

UPDATE: Aug. 7, 2020: Canada will impose tariffs on $2.7 billion worth of imports from the U.S. in response to the U.S. announcement to reinstate 10% aluminum tariffs on Canada, Canadian Deputy Prime Minister Chrystia Freeland said in a press conference Friday. The response is "dollar for dollar," she said. "We will not escalate, and we will not back down."

Canada's federal government will consult with Canadian businesses over the next 30 days to determine the impact of the tariffs.

Dive Brief:

• The U.S. will reinstate 10% tariffs on raw aluminum imports from Canada beginning Aug. 16. The move follows a May 2019 decision to remove tariffs on Canadian steel and aluminum imports, saying they no longer threatened national security — the justification for the tariffs under Section 232. The tariffs initially were announced in March 2018.
• Since the May 2019 removal of tariffs, total aluminum imports "increased substantially," a White House proclamation stated. "The measures agreed upon with Canada are not providing an effective alternative means to address the threatened impairment to our national security from imports of aluminum from Canada. Thus, I have determined that it is necessary and appropriate to re-impose the 10 percent ad valorem tariff."
• Canadian Deputy Prime Minister Chrystia Freeland called the tariffs "unwarranted and unacceptable" in a statement. "Canada intends to swiftly impose dollar-for-dollar countermeasures."

In response to the American tariffs announced today, Canada will impose countermeasures that will include dollar-for-dollar retaliatory tariffs. We will always stand up for our aluminum workers. We did so in 2018 and we will stand up for them again now. https://t.co/gYH0ziOVM4

— Justin Trudeau (@JustinTrudeau) August 6, 2020

Dive Insight:

The tariffs apply only to non-alloyed unwrought aluminum, which aluminum producers use to make intermediate and finished goods, from auto parts to cans. The tariffs would not affect a U.S. manufacturer of beverages importing finished cans from Canada, for example.

But domestic aluminum producers importing from Canada will have to pay the raw aluminum tariffs, and those costs could trickle down to manufacturers procuring aluminum parts or packaging domestically. That might encourage U.S. manufacturers to seek aluminum products from outside the U.S. at a lower total cost, making U.S. aluminum producers less competitive when selling their products to industrial customers, according to The Aluminum Association.

The decision to reimpose the tariffs comes about one month after enactment of the U.S.-Mexico-Canada-Agreement — a deal designed to reduce trade barriers between the three nations. The tariffs fall under Section 232, which uses concerns of national security as a justification for the duties. Applying duties through this provision does not violate the terms of the trade deal.

Century Aluminum, a U.S.-based aluminum producer, applauded the decision to reinstate tariffs as a way to secure domestic production. Yet many other industry groups came out in opposition to the tariffs, including the U.S. Chamber of Commerce.

EVP and Head of International Affairs Myron Brilliant described the aluminum tariffs as a "step in the wrong direction" and said most aluminum producers oppose the tariffs, despite President Donald Trump saying the tariffs were "absolutely necessary to defend our aluminum industry."

The Aluminum Association, along with the American Beverage Association, the Beer Institute and the Can Manufacturers Institute wrote a letter the U.S. Trade Representative Robert Lighthizer in late June in opposition to any tariffs or quotas on imported aluminum from Canada. "Constraints on imports of aluminum from our country’s closest ally ... will significantly increase the cost of aluminum in this country," the letter stated.

Higher prices could wreak havoc on a wide swath of industries, many of which are already struggling due to lowered demand during the coronavirus pandemic. Auto factories idled operations for months to keep plant workers safe and as demand from consumers fell. Autos Drive America opposed the aluminum tariffs.

These tariffs will also disproportionately harm Wisconsin’s storied beer industry, which is already facing weakened demand due to a national shortage of aluminum cans and a stagnant economy.

— Rep. Ron Kind (@RepRonKind) August 6, 2020

Food and beverage companies have not suffered the same low demand as the automotive sector, but they are facing a can shortage. The issue is not a shortage of overall aluminum supply but rather a shortage of cans, due to a surge in demand from can users, such as beer makers, which typically would fill some of their beer into kegs for restaurant consumption.

Heineken and Del Monte have noted increased costs and squeezed margins due to higher aluminum prices.