By Jean Simard

August 18, 2025

As Canadian negotiators weigh their options in dealing with the Trump administration’s coercive trade policies, one mechanism has been presented as a viable alternative to the current focus on tariffs: Tariff rate quotas (TRQs).

While TRQs may seem politically convenient, they are far from a one-size-fits-all solution. Borrowed from recent handshake deals with other trading partners, TRQs are no trade panacea. For the U.S., they may look like a tool to protect domestic industry, but in reality, they would cap a reliable supply source, increase volatility, and push buyers toward higher-cost, less secure alternatives.

Canada’s aluminium sector is a strategic critical-mineral industry, which the U.S. has relied upon for over a century and still does to this day, and TRQs would undermine its stability and leverage.

Aluminium Is Not Just Another Commodity

Producing aluminium requires a vast, stable, competitively priced supply of electricity—energy accounts for about 40% of production costs. This dependence makes aluminium uniquely exposed to energy-market dynamics but also uniquely powerful in trade negotiations.

The United States produces just 670,000 tons of primary aluminium annually, while consuming nearly 5 million tons. Canada supplies over 70% of U.S. aluminum imports, far ahead of sources like the Middle East and India. Those 2.7 million tons sent annually to the U.S require 40 million megawatt-hours of electricity—more than four Hoover Dams of annual output. That’s enough to power 460 data centers, the entire state of Nevada, 3.7 million homes, or the combined populations of Vermont, Alaska, Delaware, Rhode Island, and New Hampshire.

U.S. smelting capacity has collapsed—from 22 plants four decades ago to just four operating at half capacity—thanks to energy deregulation in the 1980s and China’s non-market practices. In today’s AI-driven economy, the main competition for U.S. smelting isn’t China or Canada—it is data centers willing to pay far more for electricity than smelters can afford.

The logical U.S. strategy is to keep importing clean, reliable Canadian aluminium and free up its own power grid for other high-value industries.

Neither Tariffs nor TRQs make sense

I wish we were in a world where we did not have to debate the advantages or disadvantages of tariffs vs. TRQs. Neither is desirable, nor makes sense given our North American aluminium market dynamic.

Luckily and unfortunately for the U.S. market, Canadian producers, with world-class operations, can sell to global markets and, increasingly, ship to Europe—pressuring the U.S. to remain competitive in pricing if it wants that supply back.

TRQs Are the Wrong Fit for Aluminium

Pointing to the TRQs agreed in EU, UK, or Japan trade deals is misleading. Those regions’ combined aluminium exports to the U.S. are negligible:

• Japan produces no primary aluminium.
• The UK exports none to the U.S.
• The EU sends at most 175,000 tons annually, equal to just three weeks of Canadian shipments.

In those contexts, TRQs are symbolic. For Canada and the United States, they would be economically damaging.

Why Canada Must Reject Quotas

Canada has no reason to accept quotas of any kind. If, as some have suggested, leaders like Donald Trump are more swayed by visible, immediate losses than by promises of future gains, then the sudden absence of Canadian aluminium will speak louder than any concession.

Canadian aluminium underpins the U.S. aluminium industry—one Canadian worker supports 13 U.S. workers in the sector. Handing over future growth potential on a silver platter would be a strategic blunder.

Canada should instead double down on its advantages—clean energy, secure supply, and global market relevance—to protect its long-term interests. And together with the U.S. industry, our collective focus should be on protecting and growing fortress North America, through well-paid manufacturing jobs.

Jean Simard is President and Chief Executive Officer of the Aluminium Association of Canada and Co-Chair of the Canada-U.S. Trade Council.