The looming threat of new tariffs on aluminum imports by the United States has thrown Australia's aluminum industry into uncertainty. Prime Minister Anthony Albanese is scrambling to negotiate an exemption, reminiscent of the 2018 scenario when then-Prime Minister Malcolm Turnbull secured a similar deal. However, this time the situation is more complex, with Trump accusing Australia of disregarding its 'verbal commitment' to restrain exports and Peter Navarro, Trump's trade advisor, stating that Australia is 'killing' the US aluminum market. This article analyzes the potential impact of these tariffs on Australia's aluminum producers, Rio Tinto and Alcoa, and explores the strategies they might employ to navigate this challenging trade landscape.
When Trump first roiled global markets in 2018 with an executive order commanding a 25 percent tariff on steel and a 10 percent impost on aluminum, then-prime minister Malcolm Turnbull negotiated a full exemption, a special deal only afforded to Australia. Now it's Anthony Albanese's turn to run the same playbook.
After Trump foreshadowed a new 25 percent tariff on both steel and aluminum imports, the PM was quickly on the phone with him for a 40-minute conversation that raised hopes – only to find them dashed straight after. Trump called him out as a “fine man” whose view of the trade relationship needed “great consideration,” before signing an executive order lambasting Australia as having “disregarded its verbal commitment to voluntarily restrain its exports to a reasonable level.” Trump’s trade impresario Peter Navarro followed up with another salvo on Tuesday. “Australia is just killing our aluminum market,” he told CNN. “President Trump says ‘no, no, we’re not, we’re not doing that any more’.”So, are we guilty of a lack of restraint? Perhaps. Are we “killing” the US market? Not at all. Australia has two main aluminum players – resources giant Rio Tinto and American-owned Alcoa. Rio, the largest, has an integrated mine to metal supply chain extracting bauxite in Weipa and Gove, refining it in Gladstone, and smelting aluminum in Boyne (Queensland), Tomago (NSW) and Bell Bay (Tasmania). Alcoa has mines and refineries in WA and a smelter in Portland, Victoria. Back in 2018, as Scott Morrison was wrangling the leadership from Turnbull, sales of Australian aluminum into the US started to ramp up. Before Trump’s tariffs, they made up 2 percent of America’s imports. A little over a year after Australia had gained its exemption, they had surged to 6 percent. It was enough to rouse Trump’s wrath and prompted Morrison to quietly rein in Rio and Alcoa. Turnbull’s deal for an exemption was done on a clear verbal agreement there should be no surge. We are now reaping the ill will the ramp-up has caused. ‘We’re 2.5 percent of their market. I don’t call that a flood. If you talk to North Queenslanders, that’s a very small flood.’The big aluminum players don’t like to talk about it. Instead, they put part of the surge down to restrictions on Russia’s aluminum output from the West’s sanctions as a result of the Ukraine war. If by some miracle Albanese negotiates another exemption, he can’t force the producers to toe the line without running foul of competition laws. But common self-interest remains a strong motivator. Navarro’s tough line on Australia’s output, however, doesn’t stick. As one aggrieved industry insider points out, “we’re 2.5 percent of their market. I don’t call that a flood. If you talk to North Queenslanders, that’s a very small flood.” Trump’s across-the-board tariffs, if applied equally to all, will raise prices in the US, but are unlikely to disadvantage Australia’s producers against their competitors. If Australia and Canada are singled out for adverse treatment, it’s a much more painful story. If the new tariffs differ between Australia and Canada, some – like Rio – can massage the origin of their aluminum to wherever is more favorable. Rio’s Canadian hub accounts for close to half of its global aluminum production. Much of that goes to the US, which imports about 85 percent of its aluminum needs. But Rio will be sweating Trump’s 30-day pause as he reconsiders his “beautiful” tariffs on Canada and Mexico. Alcoa, being headquartered in America’s steel capital, Pittsburgh, and sending most of its Australian aluminum output to Asia, may remain relatively unscathed.
ALUMINUM TARIFFS AUSTRALIA TRUMP RIO TINTO ALCOA TRADE WAR GLOBAL MARKETS
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