New aluminum incentive plan faces analyst skepticism

On Monday, President Donald Trump signed a proclamation intended to incentivize investments in the US aluminum industry. The proclamation directs the Secretary of the US Dept of Commerce to develop an incentive program for companies that invest in the construction, expansion, and refurbishment of aluminum smelters in the United States.  

“The notice is, I think, most notable for its admission that the 50% tariffs have simply not encouraged sufficient domestic investment in aluminum smelting.” Scott Lincicome, VP of general economics and trade at the Cato Institute, told the Carolina Journal. “I would say that utterly unsurprising that they haven’t done that but it’s at least good to see the White House acknowledge it, but the other thing is I don’t think this will move the needle at all because the primary limitation on aluminum smelting in the United States is electricity and to the extent that power prices remain high in the United states relative to other places like Canada or in the Middle East.” 

According to the proclamation, the Secretary of the US Dept of Commerce is empowered to solicit and approve onshoring plans submitted by companies. All plans must include a commitment to build, refurbish, or expand a facility in the US that will primarily produce aluminum, should the plan be approved. The company must also commit to begin construction no later than Jan 20, 2029, and any other relevant analysis or information, as well as any requirements outlined by the Secretary, must be included in the plan. 

“It’s going to be a really difficult sell for the United States, tariffs or not, and the other big impediment is simply competing for resources with other high-value investments, data centers being a huge one,” continued Lincicome. “Data centers take up a lot of electricity and in fact some old smelters in the United States have been sold off to data center companies. It’s not just that, you have to compete for natural resources and land and labor and the rest and it’s just not a very good investment.”

“When you have a massive aluminum producer just north of the border in Canada that has a lot of long term relationships in the United States there’s not a huge investment case here,” he added. “You might get a project here and there, but it will continue supply will continue to be much less than demand here in the United States.”

Companies that commit to expanding domestic aluminum smelting capacity may apply to the program. If their onshoring plans are approved, they will be eligible to import a matching amount of primary aluminum at half the tariff rate applicable under Section 232 of the Trade Expansion Act of 1962.       

“Tariffs violate the principles of freedom and comparative advantage, which is a universal and immutable law of economics,” Robert Luddy, founder and president of CaptiveAire Systems told the Carolina Journal. “Tariffs raise costs for consumers and producers, which reduces exports due to higher prices and consumer purchases.”

In June of 2025, the White House announced it was doubling the tariff rate on steel and aluminum from 25% to 50%, with a caveat for imports from the United Kingdom. 

During his first term in 2018, President Donald Trump implemented 25% tariffs on steel imports and 10% tariffs on aluminum imports. The tariffs triggered cost increases, leading industry leaders to turn to other countries as their suppliers. When tariffs on steel imports from Mexico and Canada took effect on June 1, 2018, companies like Mount Airy-based InSteel Industries Inc. were forced to shift suppliers, turning to countries like Algeria after tariffs made Canadian steel less economically viable.

“Tariffs inflate the price of goods; however, most consumers will pay the added tariffs because the products are not available in the US,” continued Luddy. “Tariffs, in most cases, will not increase American manufacturing. Taiwan Semiconductor (TSMC) announced today that the price to produce leading-edge semiconductors in the US is 20 to 50% higher than in Taiwan.” 

International relations and future business growth among our countries are undermined by tariffs, especially Canadian tariffs, according to Luddy. North Carolina manufacturing is harmed by tariffs. Revenue from tariffs will be offset by lower income taxes due to slower GDP growth, which is now below 2%. 

“Tariffs are taxes paid by manufacturers and consumers. In most cases, these tariffs are punitive, arbitrary, and harmful,” concluded Luddy.  “The US has been greatly enriched by free trade, not harmed.” 

“New aluminum incentive plan faces analyst skepticism” was originally published on www.carolinajournal.com.