An aluminum plant in the United States [AP=Yonhap News]

On the 20th (local time), U.S. President Donald Trump signed a proclamation to reduce import tariffs on aluminum by half, provided that companies build or expand production facilities within the United States.

In the proclamation, President Trump stated his decision, noting that it is "necessary and appropriate to establish an incentive program for companies investing in new primary aluminum (aluminum produced for the first time by refining ore and then performing electrolysis) production capacity in the United States."

Under the proclamation, companies whose "onshoring" plans are approved by the U.S. Department of Commerce will be subject to half the tariff rate under Section 232 of the Trade Expansion Act annually for a volume of primary aluminum imports equivalent to their projected annual production from those facilities.

Section 232 of the Trade Expansion Act allows the President to impose import restrictions if it is determined that imported products threaten U.S. national security. The U.S. has used this provision to impose tariffs on steel, aluminum, automobiles, and auto parts. The current tariff on aluminum is 50%.

Previously, Secretary of Commerce Howard Lutnick recommended providing incentives to companies that build new primary aluminum production facilities in the U.S., expand existing facilities to enable primary aluminum production, or renovate aging primary aluminum facilities to increase production volume or enhance efficiency.

Secretary Lutnick’s position was that domestic production and supply of primary aluminum, which is essential to the U.S. economy and defense industrial base, remain insufficient, and therefore, the tariff system should be adjusted to promote the production and supply of aluminum.

Although President Trump did not specify the exact background, given that Secretary Lutnick cited the "defense industrial base," the move appears related to the recent surge in aluminum prices due to the war with Iran and the urgent need for the U.S. to secure sufficient aluminum supplies for military production.