How U.S. Tariff on Canadian Aluminum Could Hurt Automakers

North American carmakers are hoping the U.S. will grant Canada a permanent exemption from an impending 5% tariff on imported aluminum to avoid hampering its efforts to make cars more fuel efficient.

U.S. producers of cast and sheet aluminum rely heavily on Canada for raw, smelted aluminum, notes Automotive News. The Aluminum Assn. trade group tells the newspaper that it would take years to add enough costly new smelters in the U.S. to offset Canada’s capacity.

Certainly, protective tariffs on Canadian aluminum would help accelerate the expansion of smelting capacity in the U.S. But the price of American made aluminum is likely to be higher regardless, according to AN. That’s because much of Canada’s success in electrical smelting aluminum ore is due to the country’s plentiful supply of relatively cheap hydroelectric power.

Higher aluminum prices could torpedo the auto industry’s accelerating use of the metal to reduce vehicle weight. For now, the average aluminum content in North America-made passenger vehicles is on track to climb from about 400 lbs in 2015 to more than 560 lbs by 2028, says Troy, Mich.-based Ducker Worldwide LLC.

Canada sells some $5.6 billion worth of aluminum to the U.S. per year, followed by Russia and China at $1.3 billion each, according to the U.S. Census Bureau.