Section 232 Aluminum Tariffs: An Analysis of Rising U.S. Aluminum Prices’ Impact on the Domestic Aluminum Industry and Subsequent Supply Chain

Abstract

This paper analyzes the impact of the Trump Administration’s pursuit of protectionism within the domestic aluminum industry. Suffering from global overcapacity and foreign dumping, U.S. aluminum producers have steadily closed operations over the last decade even in the midst of continued growth in U.S. demand. Under Section 232 of the Trade Expansion Act of 1962, the administration placed a 10% duty on imports of unwrought aluminum and select aluminum products causing a rapid spike in domestic price and production of aluminum. Using industry-specific data on price level, production and employment this paper examines Section 232 tariffs’ intended and unintended consequences on the aluminum supply chain. My results show that the tariffs have statistically significant impacts on the primary aluminum industry. Downstream analysis shows that while aluminum-consuming industries do experience negative impacts, most are minimal and thus far, insignificant. Furthermore, using manufacturing firms’ stock prices, I construct long and short portfolios based on my treatment variable user and perform a Fama-French Five-Factor model examining if the tariffs had any significant impact on markets. This Fama-French analysis fails to generate a significant alpha illustrating that either the markets were efficiently priced or that the tariffs have yet to significantly effect company earnings.