Trade war escalation: U.S. still set to effect the levies on Canadian steel and aluminum this week
The U.S. says 25-per-cent tariffs on Canadian steel and aluminum are still set to take effect on Wednesday, a move that would escalate the trade war between the two countries that President Donald Trump launched last week.
Mr. Trump initiated 25-per-cent tariffs on all Canadian goods last Tuesday, with energy and critical minerals facing a 10-per-cent tariff. Prime Minister Justin Trudeau quickly retaliated with 25-per-cent tariffs on $30-billion worth of imported goods from the U.S., rising to $155-billion if the U.S. levies aren’t lifted.
Two days later, Mr. Trump signed an executive order to temporarily grant Canada and Mexico a partial reprieve from the 25-per-cent tariffs until April 2. The order also lowered the tariff on potash, a fertilizer essential to all major American crops, to 10 per cent from 25 per cent.
But previously planned tariffs on Canadian steel and aluminum are set to begin this week, U.S. officials said on the weekend.
“We’re certainly geared up and ready to face the music,” should the tariffs go ahead, Aluminum Association of Canada chief executive Jean Simard said in an interview with The Globe and Mail.
“We’ve been here before when we had a 10-per-cent tariff five years ago. But this time – at 25 per cent – we’re moving from what was a disruptive situation five years ago to more of a destructive situation.”
Mr. Simard said that while the U.S. produces around 700 million tonnes a year of primary metal, it consumes six times that amount. Therefore, the impending tariffs will raise costs mostly for U.S. consumers and businesses, where the market will find itself having to bear the 25-per-cent increase in the price of metal.
“The really big question is, how long can the market bear this situation?” Mr. Simard added. “It’s hard to say at which point in time does one feel that this is either a very short-term situation and just take the impact or decide that you cannot afford the next day, the next week, the next month, and you decide to stop.”
A day after postponing part of the broad tariffs on Canada, Mr. Trump took aim at this country’s dairy and lumber industries, saying he could place levies up to 250 per cent on the two sectors as early as Monday or Tuesday. The White House had previously said it would impose reciprocal tariffs on April 2.
On Sunday, Commerce Secretary Howard Lutnick told NBC News that despite Mr. Trump’s earlier comments, the tariffs on Canadian dairy and lumber would wait until April 2. Mr. Lutnick and White House economic adviser Kevin Hassett added further confusion to the conversation when both referred to the tariffs as a drug war in separate media reports.
“We launched a drug war, not a trade war, as part of a negotiation to get Canada and Mexico to stop shipping fentanyl across our borders,” Mr. Hasset told ABC News on Sunday. He said both countries had made “progress on the drug war” and it was why they had “relaxed some of the tariffs.”
The daily swings in policy changes are creating widespread confusion for policy makers, business leaders and investors globally.
On Sunday, Canadian Finance Minister Dominic LeBlanc told CBC News that he has been in discussions with Mr. Lutnick about both the fentanyl border situation and the coming steel and aluminum tariffs.
“I haven’t given up that we can get to a position where we can avoid that, but again we have to prepare for this unpredictability,” Mr. LeBlanc said in the interview.
“We’ll support that sector of the economy critical to a whole series of provinces across the country, and we’ll again be ready to take countermeasures that will show the Americans that it’s not in their interest to do so.”
Canadian aluminum generates more than $228-billion for the U.S. economy, and Mr. Simard says that if companies begin to get priced out of the market and stop placing orders, the industry could see stagnation when metals stockpile on both sides of the border.
“Then at some point, as a producer, you may decide to start shipping to other markets, such as Europe,” he added. “But that doesn’t happen within a matter of days. It’s probably five to six weeks down the road.”
Catherine Cobden, CEO of the Canadian Steel Producers Association (CSPA), said that while this country’s steel producers continue to stare down a 25-per-cent tariff, the organization was “cautiously relieved” after Mr. Trump’s decision last week to partially pause tariffs until April 2.
“However, a pause does not mean the end of deeply concerning tariffs from the United States,” she said in a statement last week. “This reprieve is an opportunity to prepare Canada for the likelihood of future tariffs imposed by our largest trading partner, particularly focused on Canada’s most at-risk sectors.”
This article was first reported by The Globe and Mail
