The first shots have been fired in the unexpected trade war between Canada and the United States, but it’s not immediately clear who’s going to take the most casualties.
On Thursday, the U.S. government made a stunning announcement that Canada’s exemption from steel and aluminum tariffs, which U.S. President Donald Trump first floated in March, would be revoked as of Friday.
That means the U.S. will now view Canadian steel and aluminum the same way those metals from the rest of the world are viewed — as a potential national security threat.
The Department of Commerce is implementing tariffs on foreign metals under an obscure and rarely used clause of U.S. trade law, one that allows the president to put tariffs on foreign imports when they “threaten to impair the national security.”
It’s a targeted weapon aimed at achieving one of Trump’s key political aims: to get American companies and American people, to buy American, make American, and hire American.
‘This is big trouble’
For a country like Canada, “this is big trouble,” according to Peter Warrian, a steel expert at the University of Toronto.
But the good news, if there is any, is that Trump may have shot himself in the foot — the trade war is only beginning.
The aim of the tariffs is clear: Trump wants more steel and aluminum to be made in America, and he wants U.S. companies to buy it instead of foreign alternatives. But he has a big problem on his hands: America can’t possibly make enough of both metals to feed its own insatiable demand.
According to U.S. government figures, that country imported almost 37 million metric tonnes of steel last year. About one-sixth of that comes from Canada. Canada is an even larger cog in aluminum, contributing more than half of the almost five million metric tonnes that the U.S. consumes every year.
“The biggest importers of steel into America, by far, are U.S. steel companies,” said New York-based steel analyst Chuck Bradford.
That’s in part because some of the biggest U.S. steel mills are nearly 80 years old and they aren’t capable of making the specific types of steel that go into high-grade technology and aerospace products. U.S. mills mostly import what’s known as “semi-finished” steel from places like Canada, Brazil, and Mexico and turn them into finished products they can resell.
It’s not as if the U.S. even has the capacity to fill its own need for steel and aluminum. Steel mills take several years to get permitted and built.
“You can’t turn them on and off like a light switch,” Warrian said.