Firstly the USA has 15 aluminum production facilities in operation now. [NOTE: Someone posted a comment saying “most of those 15 are shutdown.” Unfortunately, I have lost track of that comment or I would quote it and credit them.}
A quick scan of the list of aluminum production facilities in the World puts the total at about 120. However the list I used warned that it was not a complete list.
However and merely as an example…
There is a lot, by which I mean A LOT, of aluminum smelting done in Iceland.
The Alcoa smelting plant in Fjardaal, Iceland is about 8/10th of a mile long.
ALL of the electricity it requires, and it is a lot, is generated renewably. All hydroelectric.
The Century Aluminum smelting plant in Grundartangi, Iceland is also about 8/10th of a mile long.
ALL of the electricity it requires, and it is also a lot, is generated renewably. All hydroelectric.
The Rio Tinto/Alcan smelting plant in Straumsvik, Iceland is about 6/10th of a mile long.
ALL of the electricity it requires, and it is also a lot, is generated renewably. All hydroelectric.
Together they use 12,453 GigaWatt Hours of electricity a year.
Just to give a sense of how much electricity that is, 12,453 gWh would power 251 million electric cars for a year. Which is roughly equal to the total number of cars on US roads this year. Which means ALL the car on US roads, if every automobile driven in the USA were electric.
And that is just aluminum production at three smelters in one small country.
As I understand the US Electrical Grid, it is not at all up to date. Without substantial upgrade, it appears to me that the USA’s grid simply could not supply the electricity required to return significant aluminum production to the USA.
This appears to me to be yet another of Strumpy’s “this sounds good, let’s run with it” barely thought about, harebrained schemes. Just the sort of scheme that will go bankrupt quicker than a casino.
Price calculations generally do NOT go like this:
“My cost is $100 and I want to make a fair profit of 15% so I will charge $115…”
Sounds reasonable right? But instead it goes more like this:
“My cost is $100 but Trump added a $100 tariff to my foreign competitor, so he has to sell his widget for $230 to make his 15% profit. I am TOTALLY going to sell MY widget for $230 too, but claim “Made in America” and take it all!” Bwahaha.
Not only are tariffs a tax on Americans, they raise prices even on the things not having tariffs imposed on them. As a for instance, think gasoline. Texas refinery makes gasoline, and also sells some at the gas station nearby. They charge essentially the same as what it costs some New Yorker to run his car, even though “Cost plus a fair profit” in Texas should be 1/4 what they charge for it. No, business charges what the market will bear, not cost +…
And if I can figure this out, any normally sensible person (or his kitten, even) could also. That MAGA cannot, and that Trump knows they cannot, says all I need to know on this topic.
Here are two things wrong with Trump’s “plan” to force companies to produce the needed aluminum in the USA.
- Canada is the fourth largest producer of aluminum in the world. They are behind China, India and Russia; probably not viable alternative partners to Canada for your aluminum supplies.
- Canada has a huge source of hydroelectric power enabling Canada to process aluminum at prices much cheaper than other countries. Aluminum does not exist in a pure state in nature. Bauxite ore must be refined to produce useable aluminum. It takes between 8 and 10 tonnes of bauxite to produce 1 tonne of aluminum. (Government of Canada, Mining Facts)
Canada does not have a local source of bauxite ore; nor does the USA. Our major suppliers are Australia (a fellow Commonwealth partner), China, Guinea, and Brazil.
Trump is following the same Model as William McKinley
McKinley wanted to build an Industrial empire within the US and to do so he imposed huge tariffs on Imports of Steel and other products into the US
Trump wants to go back to the period between 1897 and 1920 when the same existed in the US
There are fundamental differences though
- Back then 2/3rds of Americans worked in Farming or Low Grade Industrial Manufacturing / Blue Collar Jobs.
- Back then US had the lowest hourly wages of 25 cents an hour which was around 13 pence an hour compared to the workers pay in UK which was 4 Shillings and 6 Pence an hour which was around 54 Pence an Hour
- Back then extraction of Aluminium and Manufacturing of Steel were both profitable due to low labor costs and the fact that only 8 in 100 Americans went to College and aspired for White Collared work
- US Steel per Ton was 24% cheaper than German Steel and British Steel due to lowest manufacturing costs
- Back then US did not have a Uniform Federal Income Tax and needed Revenues from Tariffs
So US made the cheapest materials and extracted the cheapest materials like Steel, Aluminium, Zinc, Iron, Copper and Mercury
They could manufacture because they had the supply chain
US of the 1880–1930 was the CHINA of today
Let’s see how things are Today :-
- Only 9% work in manufacturing at all which is 14% of the number available in McKinley a time
- 71 out of 100 Americans today go to College and want White Collar Jobs
- The Manufacturing wages in the US is $ 17.22 an hour , against only 36 Yuan an hour ($ 4.93) in China & ₹230/- an hour ($ 2.22) in India
- US Steel per Ton last cost 55% higher than Japanese Steel and 72% higher than Chinese Steel when tariffs weren’t counted, on a per tonne cost
- US has federal taxes which accounted for 47% of the US Revenue – almost HALF OF THE REVENUE
How can you ever hope to compare the two periods ?
Jim Farley , CEO Ford estimates that the average car price would rise by $ 1,800 with the Tariffs
He however says if Steel and Aluminium were made in US, the car price would rise by nearly $ 8,000 for the Average Customer
In Indian terms that’s like paying ₹2.2 Lakh extra for the same car
More than 2 Years Groceries for the Average Family
In China – a whopping 38.3% of all working population, work in manufacturing and industry
That’s 363 Million People
Assuming the focus is on Domestic markets, that’s around 220 Million People
In US the number is 25.6 Million people
Less than Ten percent of Working Americans who work in manufacturing and Industry
Where do you get the extra workers?
My theory :-
I think he is just leveraging weaker nations into making significant compromises using the tariffs as a weapon while making his base believe he is actually going to deliver his promises of bringing manufacturing to America
Bad News:-
The Bad news is he may just about use this as a leverage and demand wiping out the 2 term limits and demand more terms for him to finish the job , using the MAGA voter base
This makes no economics sense
