Time for Action on Chinese Overcapacity

Let's Get the Job Done

In March 2018, President Donald Trump signed official proclamations to adjust aluminum tariffs to 10 percent under Section 232 of the Trade Expansion Act of 1962. The president's decision followed an investigation into the national security implications of imported aluminum that was launched in April 2017

While the Aluminum Association appreciates the president's attention to the domestic aluminum industry, across-the-board tariffs won't address the fundamental problem of massive aluminum overcapacity in China. The domestic aluminum industry is growing – creating American jobs and committing or investing more than $2.6 billion since 2013 to expand U.S. manufacturing. But subsidized production in China, which is leading to unfair and illegal trade practices, threatens the industry’s continued health.

China’s illegal subsidies to producers of both primary aluminum and semi-fabricated aluminum products have resulted in significant overcapacity in the market, hurting the plants and people of the U.S. industry. Chinese primary aluminum overcapacity continues to grow unabated, significantly distorting markets and encouraging illegal dumping. Excess capacity alone in China last year totaled 11 million metric tons of aluminum -- 40 percent of the rest of the world’s total production of 27.5 million metric tons.

“The president’s decision represents an opportunity to engage our critical trading partners on addressing persistent Chinese aluminum overcapacity,” Aluminum Association President & CEO Heidi Brock said in a statement following the tariff signing. “Now is the time to negotiate a long-term, enforceable agreement with China that tackles this perennial problem once and for all.”

Click here to see what policymakers on both sides of the aisle are saying about the need for action on Chinese overcapacity.

The Aluminum Association's Approach

In a letter to the president following his tariff announcement, President & CEO Heidi Brock shared the association's approach to address the serious trade challenges facing the domestic aluminum industry today.

  • Move toward immediate government-to-government negotiations with China to address persistent overcapacity in both primary and semi-fabricated aluminum sectors.
  • Provide tariff exemptions for countries that operate as market economies and share the association's concerns on Chinese overcapacity.
  • Adopt an aluminum import monitoring system to provide greater transparency for aluminum and aluminum products entering the U.S.
  • Minimize disruption for the 97 percent of aluminum manufacturing jobs in mid-and-downstream production processes.
In the words of Larry Kudlow, Director of the White House National Economic Council, “The United States could lead a coalition of large trading partners and allies against China, or to let China know that they're breaking the rules left and right … You call it a sort of a trade coalition of the willing.” 

Addressing Chinese Overcapacity

North America recorded its eighth straight year of consecutive aluminum demand growth in 2017, up 45.1 percent since 2009. The estimated 27.2 billion pounds of aluminum shipped domestically last year was a record since tracking began in the 1960s.  However, persistent and dramatic Chinese aluminum overcapacity is distorting the market and hurting the entire domestic value chain. During a period of record demand, the domestic industry should be growing even more. We are missing a major opportunity to grow high-paying, advanced manufacturing jobs in the aluminum sector. The industry is not asking for special treatment -- only to compete in a fair and free market where all countries follow a rules-based trading system.

The call to address Chinese overcapacity has grown following the president's tariff announcement and has transcended party lines. From Speaker of the House Paul Ryan (R-WI) to Senate Minority Leader Chuck Schumer (D-NY), to Josh Bolton, President & CEO of The Business Roundtable, to Glenn Hubbard, former chair of the U.S. Council of Economic Advisers, more and more people are recognizing that Chinese overcapacity is root of the problem and the solution is a negotiated, government-to-government agreement.

 

Visit Getting Trade Right to learn more about the Chinese overcapacity and the steps the Aluminum Association has taken and continues to take to address this consistent threat.

Click here to download the infographic, "Time for Action on Chinese Overcapacity."

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