LONDON, Feb 11 (Reuters) - Doubtful? Double down.
Seven years ago, US President Donald Trump imposed 10% tariffs on American aluminum imports to boost domestic primary metal production, but it hasn't been successful.
The tariff will increase to 25% on March 4 with no "exceptions or exemptions," aiming to enhance industrial self-sufficiency under the guise of national security.
This development isn't favorable for US consumers, evident in the notable surge in Midwest aluminum prices.
The effectiveness of further elevated tariffs in reviving the country's aging aluminum smelters remains uncertain.
Achieving greater aluminum self-sufficiency could be simpler through promoting recycling, particularly the ubiquitous beer can.
Aluminum and steel are grouped together in Trump's tariff policies despite differing market dynamics.
While the US imports 23% of its steel, it relies even more on foreign sources for aluminum, at 47%, according to the US Geological Survey.
Notably, Canada supplies over two million tons of primary aluminum annually to the US.
The market is already adjusting to the potential price and trade flow shifts.
For example, the CME Midwest US premium contract, indicating the delivered metal cost, has escalated by $100 to $629 per metric ton within a week.
Despite these movements, the actual tariff cost is still not fully reflected compared to the London Metal Exchange's cash price of $2,645 per ton.
The history of the 2018 tariffs indicates potential negotiations and exemptions may impact the current scenario.
However, the drop in European premiums suggests Canadian metal may divert from the US market due to higher tariffs.
Unlike steel, aluminum tariffs have not significantly impacted domestic production, which has dwindled from 20 smelters to just four.
The future of US domestic aluminum production hinges on projects like Century Aluminum's "Green Aluminum Smelter Project," facing challenges like sourcing renewable energy.
Efforts to secure stable funding for the project remain ongoing, with energy costs posing a crucial barrier.
The solution lies in significantly boosting aluminum recycling in the US, a key strategy to reduce import dependency more effectively than tariffs.
By expanding deposit return schemes, the US can improve recycling rates, ameliorating landfill waste and enriching the supply chain.
Enhancing recycling processes may prove to be a quicker and more sustainable approach to strengthening the US aluminum supply base compared to tariff policies.
The views expressed in this text are those of the author, a Reuters columnist.