Won’t Get Foiled Again

by on November 11, 2017 at 7:23 am in Current Affairs, Economics | Permalink

The Trump administration has just put crippling tariffs (97-162%) on the import of aluminium foil from China. Making America great again? It’s doubtful. Far more American firms use aluminium foil than make it. Indeed, only two US-based firms make it and one of them is owned by Swedes. Virginia Postrel has the details:

Only two companies have U.S. mills making the thin-gauge foil affected by the duties. The ones owned by Sweden-based Gränges are already selling all they can produce; the company has announced plans to expand capacity at its Tennessee mill by 2019. Converters say that JW Aluminum Co., the Mt. Holly, South Carolina-based company that lobbied strongly for the duties, isn’t offering them much, if any, additional supply.

Most of the ex-Chinese sales won’t even go to US firms but to firms in countries not affected by the tariffs, including Russia, Bulgaria, South Korea and Taiwan. Yes, Russia.

Conspiracy or coincidence? I want to say coincidence. On the other hand:

Donald Trump’s former national security adviser, Michael Flynn, is under investigation for involvement in an alleged plot to kidnap a Turkish dissident cleric living in the US and fly him to an island prison in Turkey in return for $15m, it was reported on Friday.

So who can say anymore? Excuse me while I go put on my hat.

1 Gil November 11, 2017 at 7:46 am

You left out the Russian “Aluminum King” Oleg Deripaska. I read that he hired Manafort and runs what was the worlds largest aluminum company….until it was surpassed by a Chinese company in 2015.

Perfect tinfoil hat material.

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2 GoneWithTheWind November 11, 2017 at 11:10 am

“only two US-based firms make it”

Well, you don’t think that is the result of China dumping? Perhaps with a more level playing field more US-based firms will no make aluminum foil and provide US jobs. Now, that would MAGA.

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3 The Other Jim November 11, 2017 at 11:23 am

+1. PhD Economist fails to understand cause and effect. News at 11.

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4 Virginia Postrel November 11, 2017 at 6:55 pm

If you read the article, which is reported not theory, you will find that aluminum converters went overseas primarily NOT because of price but because of quality and capacity issues.

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5 Harun November 11, 2017 at 8:08 pm

Sure production moved to China for quality issues. That makes sense especially for a fully automated product.

Oh and Chinese aluminum raw materials is often cheaper than market price anywhere else. I don’t know why but I suspect state run enterprise shenanigans

6 Andao November 13, 2017 at 5:56 pm

@Harun so Chinese taxpayers subsidize the cheap tin foil I buy at the market.

Unless you’re planning on your kids joining the burgeoning tin foil manufacturing industry, I would consider this a net win

7 Jeff R November 11, 2017 at 11:26 am

The tinfoil is the target of the tariff. What does that tell you?

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8 y81 November 11, 2017 at 7:49 am

What does being owned by Swedes have to do with anything? (Although I can imagine nods of acquiescence in the faculty lounge.) The point is to preserve working class American jobs.

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9 clockwork_prior November 11, 2017 at 8:01 am

Maybe the subtle point was that the Swedish owned company was making investments, obviously hoping to take advantage of what was going on, while the American company apparently pushing for the duties wasn’t going to spend any money beyond lobbying,

Which cannot be the explanation is why those socialist Swedes do so well in a free market like America’s – they know how to take advantage of government intervention for their own benefit.

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10 mulp November 11, 2017 at 12:39 pm

Socialists are more free market capitalist than the US free lunch economics based on rent seeking that drives the US since Reagan convinced conservatives they could deliver free lunches.

After all, the GOP promises that they will put more money in your pockets by cutting your costs which get cut only by cutting your pay twice as much to increase the rents that lower taxes on rents (profits) promote.

The GOP is saying that by rewarding increasing the money of money not paid to workers with lower tax rates, more jobs will be created by slashing labor costs to boost profits.

Economies are zero sum. GOP economic policies drive more government deficits to pay for the higher profits their policies of cutting labor costs, which cuts consumption, need to “succeed”.

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11 dearieme November 11, 2017 at 8:19 am

“What does being owned by Swedes have to do with anything?” It explains why the company will eventually be pillaged by US politicians or the courts.

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12 clockwiork_prior November 11, 2017 at 9:06 am

Probably not – unless it does something silly like provide more labor rights to its employees.

Then, they just might get the Tennessee VW treatment, such as the state threatening to take back already offered subsidies if VW went ahead with its plans.

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13 Troll Me November 12, 2017 at 12:08 am

It’s not like they offer secure SMS, so maybe not.

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14 mulp November 11, 2017 at 12:29 pm

It’s owned by swedes because American investors refuse to invest in a business that is economically efficient.

Ie, no monopoly rents.

Since circa 1980, US capitalism has been displaced by rent seeking which requires restricting productive capital to gain price control to set high rents.

US capitalism produced ever increasing production of aluminum, investing in ever more innovation to displace paper, wood, glass, steel and copper to create more demand as costs fell, and prices followed.

Growth in demand is limited in the US because aluminum is under attack from advanced plastics and titanium, just like aluminum attacked steel and glass while I was growing up.

I grew up with aluminum technology advances occurring with the same fanfare as Apple product launches.

Aluminum technology advances are occurring, but they don’t get noted. The aluminum body pickup truck is the exception, and the counterattack of steel in ads reminds me of the 60s. How many people remember returnable glass soda bottles and steel beer cans?

Outside the US, the market is defined by China where cost sets price as growth is required to be maximized to create the most jobs.

In a global economy where money gets 4% max, a 5% ROIC is considered dumping, unless earned on factories in the US, based on ROIC being normal at 8%+ based on interest rates of 8%+

I do find it interesting that many who attacked Korea, now China for dumping commodities like steel, aluminum, etc, failed to attack Saudi Arabia for dumpling oil, something Saudis did from 1986 to 1998, and then again in support of Bush starting the Iraq war to restrict global oil production. Saudi dumping killed far more jobs that China has in steel, aluminum, etc. Saudi dumping killed at least 100,000 oil industry jobs in the 80s and 90s. And drove down US production by 50% while US consumption increased, and global consumption increased 50%.

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15 jorgensen November 12, 2017 at 12:55 pm

“a 5% ROIC is considered dumping”

I doubt that China is earning a 5% return on invested capital up the aluminum production chain. Given the demand by aluminum for electricity, you would have to include the ROIC of the related power generation.

OTOH – it may be in America’s interest to acquiesce in China supplying under priced capital to those capital intensive industries which provide relatively little employment.

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16 MPH November 11, 2017 at 7:56 am

Oleg Deripaska has to get his investment in Manafort paid back one way or another. Big win for Oleg.

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17 clockwork_prior November 11, 2017 at 7:58 am

Wait, America is a manufacturing powerhouse – an assertion made regularly in this comment section – so obviously, this cannot be true, right?

However, is such a ludicrous juxtaposition as duties and Flynn’s Turkish entanglements supposed to amuse us, or just provide a bit more evidence of this web site’s truly unique perspective.

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18 Anonymous November 11, 2017 at 8:25 am

Take all tariff revenue, divide it by total import value, determine an effective tariff rate.

Apply that to everything from aluminium foil to .. zebras.

America is to big and valuable a market to worry about the small stuff, and that includes “dumping.”

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19 Anonymous November 11, 2017 at 9:04 am

“to” little coffee.

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20 Ted Craig November 11, 2017 at 8:29 am

The aluminum dumping dispute started under the Obama administration.

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21 mulp November 11, 2017 at 12:56 pm

But, the Obama administration did not impose tariffs. In these kinds of cases, they negotiated voluntary quotas or limited tariffs. Ie, in a case like this finding a way to restrict a low value commodity aluminum foil import while leaving the high value foil alloys untouched.

The US firm often ended worse off because they had even less incentive to invest and new products they could not produce ate away at the protected market.

For example, quotas on Honda car imports led to Honda setting up factories in the US using Japanese methods. And small pickups being sold in the US because pickups were not quota limited. Today small trucks are 50% of commuter vehicles. And quotas on small car imports did not prevent small cars becoming the norm.

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22 Lecht November 11, 2017 at 8:41 am

Trump didn’t invent US foreign tariffs or the US Commerce Dept … so it’s a bit unfair to imply he and his bureaucrats are doing something unusual in US foreign policy history.

Impetus for this specific tariff is “The Aluminum Association Trade Enforcement Working Group”, representing U.S. aluminum producers. They formally petitioned the Commerce Dept for relief from “unfair” Chinese pricing (Mar 2017)… under procedures approved by Congress. The Commerce Dept was legally required to review the petition and take action if China was deemed to be “dumping” aluminum foil. In fact, that Aluminum Association also formally protested (Oct 2017) that the Commerce Dept was too slow responding to their petition. Ultimately, Congress is the bad actor in all this dumb tariff political mechanism.

The aluminum foil subject to the unfair trade petitions includes all imports from China of aluminum foil that is less than 0.2 mm in thickness (less than 0.0078 inches) in reels weighing more than 25 pounds and that is not backed, etched for use in capacitors, or cut to shape.

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23 Tom T. November 11, 2017 at 11:30 am

Well put, and given that neither Alex nor the commenters are challenging the merits of the Commerce Dept findings, I think we can assume that all of this is just trolling.

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24 Stubbs November 11, 2017 at 1:02 pm

Trumps timing is spectacular! Kinda like the killings at the end of The Godfather.

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25 jorgensen November 12, 2017 at 4:55 pm

We can agree with a finding that China is subsidizing and dumping aluminum foil and still think that tariffs may not be an effective response.

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26 Harun November 11, 2017 at 8:11 pm

So it’s some very specific stuff.

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27 Troll Me November 12, 2017 at 12:10 am

Formerly there was such a thing as a tax which was implemented on some thing in some time and some place. Therefore any tax change is just business as usual.

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28 A Truth Seeker November 11, 2017 at 8:54 am

File under life under Trump.

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29 So Much For Subtlety November 11, 2017 at 8:58 am

We punish criminals for many reasons one of which is to deter crime. If you want to have laws against dumping at some point you need to enforce them. If Trump (or Obama) want to signal that they have such laws and they fully intend to enforce them, they will deter other people dumping things later on.

The alternative is to end up like immigration law which no one has the slightest intention of enforcing and so is broken with impunity. Or at best you need to wait until someone connected is hurt by dumping and then they can swing their paid-for-politicians into action. Better that the law is enforced uniformly and certainly regardless of whether or not there is an actual harm.

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30 Lecht November 11, 2017 at 9:19 am

“Better that the law is enforced uniformly and certainly regardless of whether or not there is an actual harm.”

… I doubt you pondered the gravity of that statement

Should unjust laws be enforced against all citizens ?

Do any unjust laws exist in America ?

How many laws exist in America (estimated to the nearest 100,000 mark) ?

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31 Roy LC November 11, 2017 at 10:23 am

The US Grant theory is that would be the fastest way to get rid of them. Presumably like yourself, Intake a more cynical view.

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32 So Much For Subtlety November 11, 2017 at 11:04 am

What is the alternative? What we have now where the laws are not enforced if you give to the Clinton Foundation but are if you annoy some little sh!t in a position of minor authority somewhere?

We either have laws or we do not. I am all in favor of not having them. But if we have them then they need to be enforced. Fairly. Equally. Consistently. Even when there is no apparent purpose to doing so.

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33 Ray Lopez November 11, 2017 at 9:18 am

Outrageous conduct, links to RU mobster-oligarch Deripaska, and makes Watergate seem tame, but keep in mind Flynn arguably did nothing wrong because of this: https://en.wikipedia.org/wiki/Extraordinary_rendition (“Extraordinary rendition, also called irregular rendition or forced rendition, is the government-sponsored abduction and extrajudicial transfer of a person from one country to another that has predominantly been carried out by the United States government with the consent of other countries.”) If it’s legal for countries to give up other countries’ people to the USA, it is a small step for the USA can give up its residents (not its citizens) to other countries, for a fee. In fact, it’s technically legal for the USA to kidnap a Mexican national in Mexico and bring him to US soil for trial (http://articles.chicagotribune.com/1992-12-15/news/9204240044_1_humberto-alvarez-machain-mexican-kidnapping – “In a ruling last June that involved the Alvarez case, the U.S. Supreme Court held that the federal government could kidnap people in other countries and bring them to the United States for prosecution, even if that violated extradition treaties or other international accords.” -note the Sup. Ct. opinion was issued under Reagan appointee Rehnquist).

In my mind, the only technical violation, aside from international law and morals which sadly these days doesn’t count, is the ‘fee’ to be paid by Turkey: was it meant to be kept by Flynn et al? If so, that’s simple plain vanilla bribery, which is illegal, as opposed to more sophisticated ‘consulting for an outrageous retainer after leaving government service’ which is not only legal, but the way bribery is done in the modern era.

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34 Anonymous November 11, 2017 at 9:21 am

He just wanted to take Dawg the Bounty Hunter to a whole other level.

But as always, these Trumpists end up in their own Burn After Reading.

https://twitter.com/ErinBurnett/status/929328632123854848

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35 Ray Lopez November 11, 2017 at 9:28 am

PS–$15 million? I’m really embarrassed for the Turkish government aka Erdogan administration that they would offer such a puny amount. Ten times more is better; probably the Turks are not used to US costs of living. 15M? Chickenfeed for Washingtonians. For another example of how international stateless people are handled by the Turks, see the Ocalan case: http://www.nytimes.com/1999/02/20/world/us-helped-turkey-find-and-capture-kurd-rebel.html

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36 Lecht November 11, 2017 at 9:32 am

“Extraordinary Rendition” apparently troubles you, but it pales in comparison to the lethal authority all recent US Presidents have assumed & exercised — to kill anyone on the planet (including US citizens) at Presidential discretion … via remote drone-strikes and cruise missile attacks.

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37 Boonton November 11, 2017 at 9:37 am

Anywhere in the world? Like at a bookstore in London? A cafe in Barcelona? Or do you mean virtual war zones where there is no controlling authority or if there is one it is supportive of anti-US terrorism?

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38 Ricardo November 11, 2017 at 8:32 pm

That case you cited merely reiterates the fact that U.S. courts have no jurisdiction over kidnappings that happen in foreign countries, even if the kidnappers are agents of the U.S. government.

Within the borders of the U.S., anyone who gets paid by a foreign government to kidnap someone can be charged with kidnapping and probably a bunch of other crimes.

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39 Boonton November 11, 2017 at 8:44 pm

“In my mind, the only technical violation, aside from international law and morals which sadly these days doesn’t count, is the ‘fee’ to be paid by Turkey: was it meant to be kept by Flynn et al? If so, that’s simple plain vanilla bribery, which is illegal, as opposed to more sophisticated ‘consulting for an outrageous retainer after leaving government service’ which is not only legal, but the way bribery is done in the modern era.”

This is absurd. If you kidnap someone in Mexico who is wanted in the US the US will probably not charge you with kidnapping but if you get caught by Mexican police before you get out of the country your in a lot of trouble.

Furthermore, conspiring to kidnap someone is a pretty serious crime. There is no legal way to ‘consult’ to traffic in human beings in the US even if you restrict yourself to only trying to traffic non-citizen residents of the US.

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40 rayward November 11, 2017 at 10:04 am

Tabarrok: “Excuse me while I go put on my hat.” Here are photos of Trump and his cabinet: https://www.google.com/search?q=aluminum+foil+hats&ie=utf-8&oe=utf-8

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41 Dick the Butcher November 11, 2017 at 10:58 am

“Excuse Me While I Kiss The Sky.”

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42 Careless November 11, 2017 at 10:31 pm

Most of the ex-Chinese sales won’t even go to US firms but to firms in countries not affected by the tariffs, including Russia

The only way I can even pretend to make a halfway decent conspiracy theory out of this is if Russia was suffering a crippling shortage of aluminum foil because they couldn’t produce it and people wouldn’t sell it to them.

But I’m guessing that’s not the case, and Alex just winds up looking like a lunatic

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43 Troll Me November 12, 2017 at 12:03 am

This should please the tinfoil hat people, who may wish to be reassured of easy availability of materials in the event of hypothetical Chinese tinfoil-related sanctions.

It can also be noted that some frequencies/wavelengths within the bioeffective range have been shown to have better receptivity within the interior of certain designs of tinfoil hats (some MIT guys said so somewhere online about somewhere in the 2GHz range), so perhaps the tinfoil hat people shouldn’t be particularly reassured or otherwise by the protection of continued production capacity of materials required for such final outputs. Mostly, they will just pay higher prices for things that have been readily availble on the market for generations.

Anyways, isn’t it time for us to enjoy the proceeds of the ongoing march of technological progress, and power down the substantial electromagnetic bath to reflect the ever-cheaper radiofrequency receiving devices? Starting with cellular and Wi-Fi signals would be the easiest, because these days most people are replacing electronics every year or two anyways.

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44 Butler T. Reynolds November 12, 2017 at 2:43 pm

My Republican friends tell me not to fret over stuff like this. They say it’s a negotiating tactic. Trump is playing 1-d chess.

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