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US Metal Tariffs And The Canadian Economy

Posted on 16 August 2018

There’s no shortage of news about US metal tariffs and the Canadian economy. The problem is in understanding the essentials. According to industry experts, President Trump’s tariffs against the world (and Canadians) are not necessarily a “shot against Canada.”

While this might be somewhat reassuring in the print media, there’s still a critical need to put a plan together that will work for both Canada and the U.S. The fact is, US metal tariffs are already upsetting the status quo in the industry, even during the initial stages.

The idea of working together for a “mutually satisfying agreement” sounds promising in a press release from the Americans. But the big question is about the definition of “mutually satisfying” and the follow-up question is about how everyone is getting there.

Protecting Canada’s steel industry against US metal tariffs

Canada has already undertaken some safeguards to protect its steel industry – at the moment this includes placing tariffs on different types of steel that’s imported into the country. And while opinion varies on strategy and implementation, many think it’s the right thing to do.

With tariffs, the Americans are attempting to stop “steel dumping” into the U.S. market – they say it’s been undermining the steel and aluminum industries for far too long. Clearly their actions are driven by self-interest, and naturally, the Canada has to implement some safeguards.

The Canadian government’s provisional quotas and tariffs

In response to recent US metal tariffs imposed on Canada, the government has targeted certain countries (along with China) with tariffs. These are designed to prevent those countries from redirecting steel shipments into Canada because of the U.S. tariffs imposed on them.

Canada’s Finance Minister, Bill Morneau, recently stated that “because of unfair tariffs imposed by the U.S., some countries are seeking alternative markets for their steel.” And that means that the Canadian steel industry is going to be at serious risk of a surge in steel imports.

Bottom line, a surge in steel imports could harm the steel producing industry in Canada, and more importantly, Canadian workers. Indeed, the European Union has imposed its own set of safeguards to discourage steel imports that might have otherwise gone to the U.S.

Canadian steel producers are already feeling the effects

The Canadian steel industry has already started to lay off workers because their U.S. customers are either scaling back or cancelling orders – a direct result of the U.S. import charges. And now, the Canadian auto-parts industry is starting to feel the impact of Canada’s counter measures.

Interestingly, some auto-parts companies report that the Canadian “retaliatory” tariffs hurt them more than the original American tariffs. This is mainly a result of the type of steel products they purchase, in particular, stainless steel as well as other specialty steels from their U.S. suppliers.

What’s the future for steel and aluminum companies?

Industry insiders agree that even beyond the steel producing companies, every company that deals in steel or aluminum will be affected negatively as a result of US metal tariffs. The severity of the hurt will depend entirely on how much steel and/or aluminum they use. Simply put, every industry connected to steel will see costs go up, and that will affect everything down the line.

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