Century Aluminum Executive Backs Trump's International Tariff Plan

Mar 6, 2018
Originally published on March 6, 2018 8:21 am
Copyright 2018 NPR. To see more, visit http://www.npr.org/.


When President Trump announced a plan for tariffs on steel and aluminum, Jesse Gary was in the room. He's an executive vice president of Century Aluminum and a supporter of the president's promise to tax aluminum imports at 10 percent, as well as steel imports at 25 percent. Mr. Gary is on the line. Welcome to the program.

JESSE GARY: Thanks, Steve. Happy to be here.

INSKEEP: I guess a free trader would ask right off the bat, why can't your company compete in the open market?

GARY: What we've seen, Steve, over the past probably 15 years here has been a devastation of the American aluminum industry. We've lost over 70 percent of our production in this country, notwithstanding that we're one of the fastest growing markets for aluminum in the world. And what's happened is state-owned enterprises throughout the world have subsidized their product to the point where we can't compete when they bring those imports into the United States.

INSKEEP: Just so I'm clear, when you say you've lost 70 percent of your production, that means you are losing production that is sold in the United States and also production that is exported elsewhere, right?

GARY: Actually, the United States, no aluminum's - very little aluminum's exported from the United States.

INSKEEP: So this is all about the domestic market being devastated on aluminum. So then the next question comes as to whether this tariff is going to be the right solution for you. What do you do? You get this 10 percent tariff on your competitors.

GARY: Yeah. So we've already announced, Steve, that once the ink is dry on the order, we are going to restart capacity in Western Kentucky. What that means is we'll restart about 150,000 tons of production in Western Kentucky, bring back around 300 jobs, and invest over a hundred-million dollars in that plant to restart it and also to improve the smelting technology in that plant so we can be more competitive going forward.

INSKEEP: Although, we should be really clear, what happens here that makes that possible is that the price of aluminum all across the United States is going to go up. That's why you would be increasing production at that spot in western Kentucky.

GARY: Well, let's talk about that, Steve, because we think there's been a lot of rhetoric on this issue, and we think it's really a bit of a red herring. So when you look at the actual potential price effects of a tariff here on the end user, we think it'll be negligible, if anything at all. But let's just assume for a second that the full effect of the tariff were to be passed along to the end consumer. Let's take a beer can, for example. There's about 3 cents' worth of aluminum in a beer can. So a 10 percent tariff on that beer can would mean the price of that beer can would go up by three-tenths of one penny, or about a penny-and-a-half on a six-pack. Take an automobile. Brand-new automobile, average automobile in this country is sold for about $35,000. There's about 400 pounds of aluminum in that automobile. If that full 10 percent were transmitted, it'd be about a $40 increase in the price of that $35,000 vehicle.

INSKEEP: First, congratulations for beginning a sentence with, let's take a beer can, for example. I'm sure there's somebody listening who might like to join you in that. But with that said, can you help me round this out? Because you're saying that the price increase makes no difference, and yet, the price increase makes a huge difference and is going to cause you to increase production. How can both of those things be true?

GARY: Steve, it's because by the time you get to the end product, the value of the aluminum content in the end product that the consumer pays is quite low. But obviously as a producer of aluminum, that's all we do and that's all we sell. So by the time it works its way down through the value chain, the effect to the end user and the consumer is very low.

INSKEEP: Here's a bigger impact, at least according to some economists. Stephen Moore - who has advised the president, by the way, on trade - said in an op-ed article over the weekend that these tariffs could protect 140,000 jobs - that sounds good - but then might put several million manufacturing and related jobs at risk because other countries are already talking of retaliation, as you know.

GARY: Yeah. So again when you look at the price effects, for those jobs to be lost, you're going to have to see demand destruction. I don't think anyone's going to stop buying a six-pack of beer because that six-pack goes up by a penny-and-a-half.

INSKEEP: I think he's talking about retaliation. Harley Davidson motorcycles. It'll be harder to sell them in Europe, for example. Or Kentucky bourbon. Those are two things that have been mentioned.

GARY: Sure. So I think the commerce secretary over the weekend did a good job talking about this. I think Mr. Moore is talking about retaliation. And in a world where we have large trade deficits and other parties have large trade surpluses, retaliation would inert the benefit of the U.S. But let's talk a little bit about some of the communities that have been so hard hit. Because I think if you go into Western Kentucky, if you go into the Bootheel of Missouri, what you'll find is that these people feel like they've been being retaliated against for the past 10 years. We've lost 72 percent of that production in these communities.

INSKEEP: Very briefly, could these tariffs not had been structured in a way to go against China or someone that is seen as more of an economic competitor, rather than an ally like Canada or Germany?

GARY: Yeah. So aluminum is a commodity. And so in order to have an effective remedy for a commodity, it needs to be broad and comprehensive. Because what will happen is that if you just have targeted tariffs, what would happen is the aluminum trade flows would shift. And so what you'd see is, if Canada were to be excluded, people would just bring aluminum in through Canada, and or those job gains and those restarts would actually occur in Canada rather than the United States.

INSKEEP: OK. Mr. Gary, thanks very much. Pleasure talking with you.

GARY: Thanks for having me.

INSKEEP: He's an executive vice president and general counsel for Century Aluminum. Transcript provided by NPR, Copyright NPR.