Some in Washington see aluminum policy as a fight over smelters - the plants that actually make raw aluminum. But the numbers say otherwise.

Cutting tariffs on Canadian aluminum would put U.S. manufacturers at a greater cost disadvantage against foreign producers.

There was plenty of hand-wringing in Washington after the collapse of recent U.S.-Canada trade negotiations. At issue was a reduction in the tariff on Canadian primary aluminum - a concession also expected for fabricated aluminum products. But cutting tariffs on Canadian aluminum would have put U.S. manufacturers at a greater cost disadvantage against foreign producers. It's a good thing the talks failed.

Right now, aluminum in Canada and Mexico costs a fraction of what American manufacturers pay. That's the problem Washington must solve - and something the proposed trade deal would have only exacerbated.

Here's how the market works: Aluminum buyers everywhere start from the same world price, set on the London Metal Exchange. On top of that, each region pays a "premium," the charge for physical delivery of metal into that market. In June, the U.S. premium averaged roughly $1.17 per pound. However, the premium for Canadian metal ran just 21 cents, and the premium for Mexico was about 16 cents. That means U.S. fabricators pay roughly $1 more per pound - or about $2,000 per metric ton - for the same aluminum. It's a cost gap barely equalized by the current 50% aluminum tariff.

The deal that collapsed on Aug. 21 would have cut the Section 232 tariff on Canadian primary aluminum from 50% to 25% - with fabricated aluminum products expected to receive the same treatment. That would have hit U.S. aluminum extruders hard, because a 25% tariff cannot come close to covering the current cost gap.

The math makes this clear. Start with what fabricators would gain. When news of the deal broke, U.S. premium futures fell from $1.17 per pound to 95 cents, about 22 cents of expected relief, though even that may overstate the benefit. Because Canadian smelters price their exports from the American market price, a lower tariff would let them raise their own premium from roughly 21 cents to at least 45 cents - and keep much of the tariff savings for themselves instead of passing it on to American buyers. Alcoa's (AA) own chief financial officer conceded in December that even with a preferential Canadian rate, the U.S. premium would likely only "step down a little bit."

Now consider the other side of the ledger - what America's fabricators would have lost. Lowering the U.S. tariff on downstream aluminum products to 25% would have also cut roughly 66 cents per pound of duty protection from Canadian extrusion products entering the U.S. That means 22 cents of relief against 66 cents of lost protection - a net 44-cent-per-pound blow for an industry already surviving on single-digit margins.

Some in Washington see aluminum policy as a fight over smelters - the plants that actually make raw aluminum. But the numbers say otherwise.

Downstream aluminum fabricators in the U.S. generate more than 75% of the industry's $41.3 billion in earnings and employ up to 97% of its workers. Census data reports roughly 192,000 American jobs in aluminum fabrication but fewer than 4,000 in smelting. That equates to 48 downstream U.S. jobs for every one job at a smelter - and that includes more than 170 extrusion plants in 36 states. It's all part of America's metal-fabrication base of roughly 1.45 million workers. All told, the U.S. aluminum sector anchors roughly 700,000 direct, indirect and induced jobs, with over $228 billion in economic output.

Downstream plants are also the only real customers for American primary metal. U.S. smelters produced 660,000 tons of primary aluminum in 2025, but the country consumed 5.7 million tons. That means American-smelted metal is sold to American fabricators - or not at all.

Aluminum is rightly treated as a national-security industry, since it's a fundamental input for military systems and hardware. In an unpredictable world, the U.S. must retain this domestic capacity. But preserving and expanding America's smelting revival can't happen without domestic downstream buyers. That's precisely why the Commerce Department's original Section 232 investigation in 2018 found downstream tariff coverage to be essential.

America's aluminum fabricators should not be asked to surrender 66 cents of tariff protection for 22 cents of uncertain relief. The Trump administration must maintain the full 50% Section 232 tariff on aluminum, hold the line, and reject any measure that disadvantages America's downstream producers or pushes production offshore. Trade away the fabricators and there is no primary revival left to negotiate for. Protect them, and the demand base for America's rebuilt smelting capacity will drive itself.

Andrew Rechenberg is a senior economist at the Coalition for a Prosperous America.