U.S. President Donald Trump announced yesterday that听听鈥� including those from Canada 鈥� in a move being criticized by industry, politicians and labour groups for the far-reaching economic harms they could bring.
听补苍诲听听have said the measures create economic uncertainty and could be devastating on both sides of the border, particularly where steel and aluminum support key industries in the U.S., like defence, shipbuilding and the听.
If they proceed and go into effect on March 12, this will be the second time Trump has levied tariffs on the commodities. During his first term in March 2018, he introduced steel and aluminum tariffs of 25 and 10 per cent respectively, prompting Canada to respond with a series of counter-tariffs on American products like orange juice.
The White House said late Tuesday (Feb. 11) that the planned 25 per cent tariffs on steel and aluminum imports would be听. They were听听to allow those countries to deal with border-security issues.
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To gauge the impact of these measures on the Canadian economy and these sectors, we spoke with Stephane Mechoulan, an associate professor in the Department of Public and International Affairs in Dal's Faculty of Management, and Gabrielle Bardall, an adjunct professor in the Department of Political Science and fellow with the Centre for the Study of Security and Development.
What is the effect of these tariffs on Canadian steel and aluminum and what is the value of that trade annually?
GB: Steel and aluminum exports to the U.S. are strategic industries in Canada's economy, worth about $35 billion annually (CAD). However, they make up a fairly small percentage of Canada's overall GDP (less than one per cent of annual GDP). So, although some analysts suggest the overall impact on the economy will be minimal, we should be looking at the bigger picture. Because our economies are so integrated, a move like this is disruptive and expensive. It will upset supply chains, raise costs for businesses, drive up consumer prices and may eliminate jobs. Trump is playing politics more than economics by upending peoples' lives in this way: he is buying points among domestic constituents that want to see a return of domestic auto manufacturing while destabilizing densely populated, politically influential regions of Canada.
SM: The 25 per cent tariff is expected to make Canadian steel and aluminum more expensive in the U.S. market, reducing demand for these imports. Historically, such tariffs have led to a decline in Canadian exports to the U.S. For instance, after the 2018 tariffs, Canadian steel exports to the U.S. decreased by 37.8 per cent in June 2018, and aluminum exports saw an average monthly decline of 18.6 per cent during the tariff period compared to 2017. In 2023, Canada exported approximately 3.08 million tons of aluminum to the U.S., accounting for 56 per cent of U.S. aluminum imports for domestic consumption. The steel export figures are lower (Canadian steel exports are valued at around $3 to $4 billion per year, making up about 15 to 20 per cent of U.S. steel imports), but still indicating a substantial trade volume that will be affected by the new tariffs.
Are there particular parts of the country that will be more affected by the tariffs?
GB: These tariffs will really hit southwestern Ontario and Quebec. Cities like Windsor, Kitchener-Cambridge-Waterloo, Brantford, Guelph and Oshawa are at the heart of auto-production and parts, while Hamilton is the steel capital of Canada. In Quebec, Saguenay-Lac-Saint-Jean and Trois-Rivi猫res are the center of aluminum production. Should this be a precursor to the threatened 25 per cent blanket tariff (announced last month), we would see a much broader geographic distribution of harm, especially in the oil-producing West and oil refineries in Atlantic Canada, and forestry centres across Canada.听
SM: The tariffs will disproportionately affect Canadian regions heavily involved in steel and aluminum production. Provinces like Ontario and Quebec, where major production facilities are located, are expected to experience the most significant economic impacts, including job losses and decreased industrial output.
How will this impact U.S. industries/companies that rely on Canadian steel and aluminum?
GB: The United States produces a lot of steel but very little aluminum, so the impacts on industry are different. The 2018-19 trade war hurt Canada's aluminum industry, but Quebec and British Columbia's鈥痟ydroelectric-powered smelters softened the blow鈥痓y keeping costs low and maintaining demand for鈥痗leaner aluminum. The tariffs hurt Canadian exports, but didn't make U.S. aluminum significantly cheaper, muting the overall effect in Canada. The 2018 tariffs caused steel prices to rise for U.S. manufacturing industries, putting them (and downstream industries) at a disadvantage. By the end of 2019, hundreds of companies across the U.S. had filed nearly 100,000 requests for exemptions from the steel tariffs. In all, analysts estimate that the 2018-19 tariffs may have resulted in 1,000 new jobs in steel production, but overall tariffs on both industries likely resulted in 75,000 fewer manufacturing jobs in firms where steel or aluminum are an input into production.
SM: U.S. industries that depend on Canadian steel and aluminum, such as automotive, aerospace, and construction, will face increased production costs due to higher prices for these materials. These increased costs should be passed in part on to consumers, leading to higher prices for finished goods. Additionally, supply chain disruptions could occur as companies seek alternative sources for these materials.听
How will this affect Canadian consumers?
GB: The first impact likely to be felt by Canadian consumers is on prices of goods and delayed production, especially if Canada retaliates. Job losses would be initially confined to regions with direct ties to steel and aluminum export. The Canadian Labour Congress states that over 43,000 Canadian jobs are directly or indirectly at risk by the tariffs. reports that auto plants could shut down within a week and about 30,000 steel and aluminum manufacturing workers could temporarily lose their jobs in the short term. Longer-term estimates put the number of affected workers anywhere from 100,000 to 600,000.
SM: While the direct impact on Canadian consumers may be limited, there could be indirect effects. Canadian producers are expected to鈥痵eek alternative markets or reduce production, potentially leading to job losses and economic downturns in affected regions. This economic impact could reduce consumer spending power and affect local economies.听
How does Canada respond most effectively to these tariffs?
GB: Canadian leaders are very aware that this is possibly the opening act 鈥� not the grand finale 鈥� of a potential trade war. Retaliation is likely to be highly targeted, including dollar-for-dollar counter-tariffs, changes to public procurement to prioritize Canadian producers and immediate relief measures for workers directly impacted. More broadly, responding through a negotiated solution has been very difficult because Trump's end game is a moving target. Are these tariffs punishing Canada's response on fentanyl or border security? Trying to level a trade deficit? Or are they the opening act of a hostile annexation project? We all have whiplash from the ping-pong of conflicting messages from the White House. Responses need to stay level-headed and be proportionate to the harm at hand. They must avoid reflecting the amplified threat of harm that lingers over us more broadly, dark though the shadow may be. Canadian citizens however are under no such diplomatic confines and are already responding loudly with , revised U.S. vacation plans and boos and jeers at sporting events. 听
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SM: In response to the U.S. tariff threats from last month, the Canadian government announced plans to impose 25 per cent tariffs on $155 billion worth of imported U.S. products, including passenger vehicles, trucks, buses, steel, aluminum products, and certain fruits. This retaliatory measure aims to pressure the U.S. to reconsider its tariffs and protect Canadian industries. Additionally, Canada is exploring diversifying its export markets to reduce reliance on the U.S. and mitigate the impact of such tariffs in the future.
Counter-tariffs are not an effective response from an economic point of view, as they will penalize the Canadian economy even more. It is more of a political statement, particularly important in an election year, to appear firm and strong. They can be rational economically only if they are meant to deter the tariffs from being implemented in the first place. The 1929 Depression gives us a clear picture of what happens when a trade war occurs (in the 1930s). It's not pretty.
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- Bolstering Canada鈥檚 right to repair could shield it against U.S. tariffs and trade uncertainty
- 听听(Dal's听Matthew Herder in The Globe and Mail)