The Canadian steel and aluminum sectors are bracing for the effects of a 25-per-cent tariff on exports into the United States, after briefly enduring the threat of incurring double that amount, with Canada’s sole independent steelmaker, Algoma Steel Group Inc., planning to temporarily halt its U.S. shipments.
U.S. President Donald Trump early on Tuesday vowed to put a 50-per-cent tariff on Canadian aluminum and steel imports in retaliation for Ontario Premier Doug Ford imposing a 25-per-cent surcharge on electricity exports.
By late afternoon, Mr. Ford agreed to suspend the surcharge after a call with U.S. Commerce Secretary Howard Lutnick. The White House later confirmed that the U.S. would stick with its original plan of levying tariffs of 25 per cent on Canadian and steel imports at midnight Wednesday.
Ontario Premier Doug Ford says he will delay energy tariffs on the U.S.
The Associated Press
The short-lived threat of 50-per-cent tariffs on Canadian steel and aluminum exports into the U.S. was the most forceful move yet by Mr. Trump in a trade war that had been bubbling since he was voted in last November, but started in earnest a little more than a week ago.
Algoma Steel Group: Canada’s only independent steelmaker already reeling from tariff uncertainty
Michael Garcia, the CEO of Algoma Steel, based in Sault Ste. Marie, Ont., said that a 50-per-cent tariff on Canadian steel would have cost the company about $600-million a year, or about half its U.S. revenue. The 25-per-cent tariff will end up costing the company $300-million, a far less damaging amount, but still a level that will cause it to shift its business model over time.
The company has already been forced to lay off 20 people, mainly as a result of the huge uncertainty caused by the back and forth over tariffs. Algoma employs 2,500 people at its Sault Ste. Marie plant.
Algoma also plans to temporarily halt all of its shipments into the U.S. for the next two days, until the dust settles on the tariff picture.
“It’s been very concerning and disruptive,” Mr. Garcia said of the volatility.
But regardless of what happens over the coming months and years, the company will focus on winning more domestic business, so as to rely less on the U.S. Algoma currently generates about $2.5-billion a year in revenue with about 50 per cent of that coming from the U.S.
“Part of our strategic view is developing more business in Canada that isn’t subject to unanticipated or extreme changes in trade policy,” he said.
Almost all Canadian steel exports go to the U.S.
Canada is almost exclusively reliant on the U.S. market for its steel exports, sending 99 per cent there. Dumping by China, the world’s biggest producer, makes it difficult for Canadian producers to sell into other markets. In addition, the high cost of transporting the metal can make it uneconomic to ship to other markets.
During his first term, Mr. Trump imposed 25-per-cent tariffs on imports of Canadian steel and kept them in place for nearly a year. In the immediate aftermath, Canadian steel exports to the U.S. fell by 38 per cent.
Apart from Algoma, the other major steelmakers in Canada are Cleveland-Cliffs Inc., owner of Stelco, and Luxembourg-based ArcelorMittal, owner of Dofasco. The steel industry employs 23,000 people in this country.
“The tariffs are reckless, an attack on Canadian jobs, our communities and our sovereignty,” said Marty Warren, Canadian national director for the United Steelworkers, which represents thousands of Canadian steel and aluminum workers.
The tariffs cloud has already affected investment in Canada and reduced demand from customers.
“Buyers are holding back. They don’t know what the price is going to be, so it’s affecting our order sheets.” said Mr. Warren.
Buyers in the U.S. are also feeling the impact
Rigidized Metals Corp., based in Buffalo, N.Y., buys steel and aluminum domestically but it has already suffered a 20-per-cent price hike in both aluminum and cold-rolled carbon steel, even ahead of the tariffs going into effect.
Rick Smith, president of Rigidized Metals, isn’t a fan of Mr. Trump’s tariffs, and he bemoans the fracturing of the relationship with Canada, a staunch ally.
“I’m miffed. Even going to the hockey games aren’t fun any more,” he said. “I just don’t know what our President is up to, it is embarrassing.
“That is the real truth about tariffs. It is an inflationary situation. Even if we can avoid sourcing material from Stelco and Dofasco and the Canadian steel mills and avoid the aluminum guys in Quebec, the price increase will still be there. There are going to be a lot of difficulties and I’m just not sure our President gets that.”
Aluminium industry better placed to weather tariff war
Canada’s aluminum producers are potentially better protected than the steel sector from the imposition of tariffs.
About two-thirds of the Canadian aluminum sold into the U.S. is ingots, a commodity that can be sold to other markets, such as Europe. Aluminum’s lower density compared with steel means that freight costs don’t significantly hurt margins if the shipments are diverted to other markets.
Canada produces about 3.2 million tonnes of primary aluminum a year, with 90 per cent of its output going to the U.S. The biggest producers are Anglo Australian miner Rio Tinto PLC, Pittsburgh-based Alcoa Corp. and privately held Quebec-based Aluminerie Alouette. The industry employs 9,500 people in Canada.
The U.S. is a net importer of aluminum, producing about 670,000 tonnes of aluminum a year, but consuming about five million tonnes. More than half of U.S. aluminum imports come from Canada, with the automotive sector its biggest customer. The body of Ford’s F-150 pickup, the biggest-selling vehicle in the U.S., is made from military-grade Canadian aluminum.
Candace Laing, Canadian Chamber of Commerce CEO, called the Trump tariffs on aluminum and steel incredibly destructive.
“These two Canadian metals are the infrastructure that holds up and holds together American defence, homes, cars, energy and countless other symbols of security and strength,” she said in a statement.
“Without Canadian steel and aluminum, the U.S. won’t have enough of either metal to satisfy the needs of its demanding economy – or build the bright “golden age” President Trump has promised.”
On March 4, the U.S. levelled 25-per-cent tariffs on most imports from Canada, and a 10-per-cent tariff on energy and critical minerals. But within days, the Trump administration paused tariffs on products covered by the U.S.-Mexico-Canada Agreement (USMCA) until at least April 2.
With reports from Jameson Berkow and Jeff Gray.
