Canada Considers Aid for Aluminum Producers Amid 50% US Tariff

Canada is exploring financial support options for its major aluminum producers, including Rio Tinto, as a safeguard against the ongoing trade tensions with the United States. This potential assistance is contingent on the continuation of the 50% tariff on aluminum imports beyond the mid-term, as stated by Jean Simard, CEO of the Aluminium Association of Canada (AAC).

Simard revealed in an interview that preliminary discussions are underway, aimed at providing support to the industry should Ottawa fail to secure a trade deal with the US, its largest trading partner, by the July 21 deadline. While Canadian aluminum companies currently face no liquidity issues, Simard cautioned that a prolonged 50% US tariff could eventually strain Canada’s financial system.

About 50% of the aluminum used in the US is imported, with the majority coming from Canada. Last year, Canada exported 3.2 million tons of aluminum to the US. The recent increase in steel and aluminum import tariffs to 50% by US President Donald Trump is part of a broader strategy to pressure global steel producers and escalate the trade war, with the goal of boosting local production of essential materials for construction.

Simard emphasized that the potential support for aluminum firms is part of a broader discussion where all options are being considered. He noted that no final decision has been made. With the 50% tariff in effect since June 4, it is understandable that discussions are taking place regarding the potential impact on businesses’ liquidity if the situation persists.

Simard’s comments follow earlier reports that Mélanie Joly, the Minister of Innovation, Science and Industry of Canada, is in talks with Rio Tinto to provide financial assistance in response to Trump’s tariff policies. Joly reportedly raised these discussions in a meeting with business leaders in the Saguenay region of Quebec, a major center of aluminum production.

Rio Tinto declined to comment on the matter. However, a spokesperson for Joly’s office stated that Ottawa is actively engaged in conversations about the best ways to support Canada’s aluminum industry in the face of unjustified US tariffs, with the aim of encouraging greater investment in the sector.

Trump’s tariff policies on steel and aluminum have had significant implications. The US plans to back and promote investment in domestic steel and aluminum production, which are key products in the construction sector. Aluminum also has additional benefits, being widely used in the transport sector and the packaging industry.

However, aluminum end-users in the US have faced challenges. They must pay at the London Metal Exchange when purchasing raw materials and incur additional costs for the spot market price, including shipping and duties. The US manufacturing sector, which relies heavily on raw-material imports, has seen a decline in sales. May data from the Institute for Supply Management (ISM) indicated that the sector contracted for the third consecutive month, reaching a six-month low. This decline has led to job losses throughout the industry and has been exacerbated by rising energy prices.

It is also worth noting that while Canada exports aluminum to the US, it also imports steel. A quarter of US steel comes from imports, primarily from Mexico and Canada. This dynamic adds another layer of complexity to the trade tensions between the two countries.