If the murky clouds of Trumpian nihilism are dragging down your spirits, we have a quick little mood stabilizer for you: go to the website of the London Metals Exchange and gawp at the price chart for Platts’ index of the “Aluminum Premium Duty Paid US Midwest.” The hockey stick you’ll see there is a picture of President Donald Trump’s off-the-cuff tariff threats against Canada landing squarely on the skulls of middle American manufacturers and consumers. They are, as of Wednesday, paying US$400 (C$570) a tonne more for aluminum, most of it Canadian, than they did before Trump was elected. You would have to have a heart of stone, or perhaps cold gray rolled aluminum, not to laugh.
The background is filled in superbly in a Bloomberg News piece picked up by our Siamese-twin newspaper, the Financial Post. American aluminum suppliers have been warning the still-new administration that imposing tariffs on Canadian aluminum, as the president has been threatening to do, will simply lead to the whole of the added amount being applied to U.S. customer prices. There is not much room to reduce aluminum demand outright in the United States, and as the cost of a potential tariff is gradually injected into the market, cross-border flows have remained as high as ever. The Canadian-side producers are not changing their export plans — just their prices. If Trump follows through with plans to begin imposing the 25 per cent tariff on March 12, which nobody seems sure he will, the Midwest premium (and the analogous amounts paid by other U.S. customers) will simply nose even higher in response.
Which, of course, raises the question “Why the eff are these people doing this?” Even if you’re a fan of protectionism in principle, you ought to be able to (a) acknowledge tariffs as a species of tax and (b) foresee very obvious cases in which most of the incidence of the tax will plop directly onto your own citizens.
One might add that you don’t have to be an economist to look around your domicile to make a quickie estimate of the amount of aluminum in your furniture, and your lightweight electronic devices, and your appliances, and the very building in which you’re situated. (Pity poor Apple Inc.; they spend 30 years psy-opping the world into thinking brushed aluminum was sexy, and now this happens.) If you’re feeling especially adventurous, go see how much aluminum your local power substation uses, or how much aluminum there is on a large commercial farm with a Quonset or two. One word ought to be thrumming in your head as you do this: inflation, inflation, inflation. And then remember that if you’re on the Canadian side of the border, this is not your problem.
National Post