Canadian steel and aluminum businesses are already feeling the consequences — and the déjà vu — of Donald Trump’s latest tariff threat, several years after he targeted the same industries with a punishing import tax.
The U.S. president mused on Sunday that he would slap a 25 per cent tariff on steel and aluminum imports from all countries — including Canada, only one week after this country temporarily staved off the crisis of a blanket tax on all exports to its largest trading partner.
“It’s extremely worrisome. It’s difficult to peg an exact monetary value on it. I would say at this point I think we’ve already expected a 25 per cent drop in sales from orders that have fallen through,” said Rahim Moloo, managing director and owner of Conquest Steel, a steel manufacturer and distributor based in Toronto.
The threat is already impacting his business, said Moloo, with a handful of U.S. distributors cancelling their purchase orders and leaving the company with a significant amount of inventory. Some Canadian distributors, meanwhile, have decided to stop shipping to the U.S. amid the ongoing uncertainty.
Conquest Steel was in the midst of expanding into the U.S. market; it kept its manufacturing facility in Canada to support domestic job creation and the economy. “That’s a decision that’s coming back to bite us a little right now,” Moloo said.
“I’m predicting that the amount of business that we’ll end up losing and the impact on our business will only increase as the days go along unless we’re able to find some creative solutions to manage it.”
‘Everything’s on hold’
Back in 2018, Trump imposed a 25 per cent tariff on steel and a 10 per cent tariff on aluminum from its free trade partners Canada and Mexico as well as other countries. Canada and Mexico struck back with their own tariffs, all of which were lifted after the Canada-U.S.-Mexico Agreement (CUSMA) was negotiated and signed, replacing NAFTA.
The 2018 tariffs targeted about $16.6 billion worth of Canadian steel exports and $9 billion of aluminum exports. After they were imposed, steel exports dropped nearly 40 per cent, and aluminum by more than half. The costs of those tariffs were largely passed down to steel and aluminum-consuming business and consumers in the U.S.
Ryan Jordan, president of RJ Steel in Windsor, Ont., said the 2018 tariffs forced his business to diversify its revenue streams. But with the most recent tariff threats looming over the industry, he anticipates that he’ll be making calls to U.S. customers soon to weigh how the tariffs will impact their orders.
“I believe that it will be difficult with the larger jobs that we have ongoing. There are contracts that we have already, jobs coming up, that we did not implement these tariffs to,” he said. “In other words, there may be a situation where I need to reach out to a customer and speak to that.”
Fast-forward a few years, and while exports to the U.S. have more than recovered, business owners like Moloo are worried that all the yoyo-ing will scare U.S. partners away for good.
By creating an uncertain investment environment in other countries, Trump is incentivizing American manufacturers to stay in the U.S. instead of outsourcing work abroad, Chrystia Freeland warned in December before she stepped down as finance minister.
Canadian companies are now shelving investment plans because “they can’t know what sort of environment a future capital investment or expansion is going to face. They don’t know what Donald Trump is going to wake up tomorrow morning and decide to do,” said Jim Stanford, an economist and the director of the Centre for Future Work.
“We’re dealing with an erratic autocrat here. This is what’s become clear, and for businesses making a business case for a new project, how do you deal with that?” Stanford asked. “So everything’s on hold. We are seeing cancelled orders in key industries, so we are already feeling the effects.”
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association and a member of the prime minister’s Council on Canada-U.S. Relations, says his organization is ready to act ‘when and if’ Trump does something that threatens the industry.
‘It cannot last,’ says CEO of aluminum association
Several industry leaders issued strong rebukes after the latest tariff threat. Jean Simard, the president and CEO of the Aluminum Association of Canada, told CBC News in an interview that Canadian aluminum companies will need the federal government’s support to sustain themselves during a potential crisis.
“At the end of the day, a 25 per cent tariff is so significant in terms of the economic impact, that it cannot last. It’s not a long-term thing,” said Simard. “If it’s not a long-term thing, you want to remain in the market in the hope that when things revert, you still have your clients and you still have your part in this whole value chain.”
Catherine Cobden, the CEO of the Canadian Steel Producers Association, says that should the tariffs materialize, Canada should respond to the U.S. with “immediate and strong” retaliatory measures.
“I think every nation understands that steel is a very strategic industry. It plays an important role in the economy. Many key sectors of the economy that you know rely on steel. It has an infrastructure and a defence application, so you really want your domestic industry protected, and that’s the case in Canada, too,” she said.
“Tariffs at 25 per cent going into one of our main markets will be devastating on our industry, devastating on our employees, and we really can’t let this happen.”