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How Steel and Aluminum Tariffs will Affect Canada and the US

Posted on 24 July 2018

Here’s the question. Do you really understand all of the chatter around Canadian and American steel and aluminum tariffs? Do you know which industries are going to be affected? Do you know how the average consumer will be affected? Chances are, except for the huge headlines, most of us have little or no understanding about the ramifications. Truth is, we really just need the basics.

The latest headlines are about the United States challenging Canada’s retaliatory tariffs that were meant to respond to American steel and aluminum tariffs. It seems that the Americans didn’t appreciate being “tariffed” by Canada (and other international trading partners). Somehow, the Canadian retaliatory tariffs are considered without justification by the American administration.

Does all the back-and-fourth sound somewhat absurd for steel & aluminum tariffs?

Well – that’s exactly how Canadian officials have described it. They consider Washington’s steel and aluminum tariffs “absurd and illegal” – mainly because Canada is being defined as a national security threat to the United States. Ottawa’s response to the recent steel and aluminum tariffs has been to counter with equivalent tariffs on American steel, aluminum and consumer products.

As for the Americans, they seem to be quite content engaging in trade disputes with everyone – the European Union, Turkey, China, Mexico, and of course, Canada. Suffice to say that tariffs and counter-tariffs will be the focus of international relations between all for some time to come.

Different interpretations of international trade laws

Clearly, there are different interpretations of international trade laws among the trading nations. And this makes it difficult to resolve the disputes, whether through legal channels or through the World Trade Organization. The underlying issue, and one that most nations agree, is overproduction and overcapacity throughout the world. And naturally, every country wants to protect their own interests, safeguard their own industries, and avoid any negative effects on national employment. For Canada, these cross-border tensions are affecting the overall trading relationship – including the renegotiation of NAFTA (North American Free Trade Agreement).

Is there a potential for more tariffs on the horizon?

With talk about impending tariffs in the automotive sector, there is fear that added levies on the Canada-U.S. auto sector would pose far more damage to the economy than steel and aluminum tariffs. Ontario in particular would suffer the most significant economic blow in Canada. Here again, the idea of a “national security threat” is something that the Ontario government and the Canadian government will vigorously argue against. On the contrary, America and Canada have a historic trading relationship, sharing many of the same business and commercial goals. On this front, both the federal government and the newly elected provincial government are together.

The big question remains unanswered. What’s next?

The experts say that trade wars will escalate, although it’s hard to anticipate who will take the biggest hit. The idea for the USA is to “buy American, hire American, and make American”. And while this isn’t good news for Canada (at least with steel and aluminum tariffs), the neighbours down south cannot possibly produce enough steel and aluminum to satiate their demand. How this aspect of the trade war unravels will depend more on the personalities than the metals.

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