FEATURE
tariffs under a rarely-used American trade clause that allows
the country to levy tariffs against materials that “threaten to
impair the national security.”
The tariffs – and the reasoning behind them – were unprecedented
and seen as a major threat to the Canadian economy.
On July 1, 2018, Canada fired back with a retaliatory tariff
package on up to $16.6 billion in imports of steel, aluminum
and other products from the United States. The dollarfor
dollar countermeasures represented the 2017 value of
Canadian exports affected by the U.S. tariffs.
According to the Canadian Steel Producers Association,
more than 11 million tonnes of steel, worth over $14 billion,
were traded between Canada and the U.S. in 2017.
Canada buys more than 50 per cent of U.S. steel exports,
making it the number one foreign destination for that
product. In fact, American steel imports cover one third of
Canada’s domestic market needs.
Likewise, the United States is the number one market
for Canadian steel, taking in roughly 90 per cent of Canada’s
exports and almost 45 per cent of domestic steel production.
However, steel imports from Canada only represent about six
per cent of the U.S. domestic market.
The Government of Canada says the steel industry
employed more than 23,000 Canadians in 2017 and contributed
$4.2 billion to Canada’s gross domestic product (GDP).
Meanwhile, the aluminum industry employed 10,500 people
and generated $4.7 billion towards Canadian GDP.
Political motivation
Prominent steel economist Dr. Peter Warrian says the tariffs
are about politics, not economics.
Warrian, who is Senior Research Fellow at the University
of Toronto’s Munk School of Global Affairs, said the Canada-
U.S. steel trade is already relatively balanced.
“If you count by number of tonnes or by dollar value, basically
after 20 years of the NAFTA North American Free Trade
Agreement, it’s relatively balanced,” he told Piling Canada.
“Depending on how you count, there may be $6 or $7 billion
of steel going each way annually. It basically evens out.
“The issue is on the political side. It’s the election of Trump
and him choosing to make a major issue about the U.S. trade
deficit. In fact, overall in Canada – forget steel for the moment
– the Americans have a trade surplus with Canada. There is
no deficit as Mr. Trump says.”
Warrian said the political undercurrents impacting the
steel trade are what make the current situation so “difficult
and frustrating.”
While the national security reasons cited by the U.S. may
never hold water with the World Trade Organization, it may
take years for the issue to have its day in court.
“But meanwhile, if you’re out there running a company,
the damage can be done,” said the steel economist.
The U.S. tariffs are being felt by steel producers like
ArcelorMittal Dofasco in Hamilton, Ont., which is heavily
entwined with the auto industry. About 40 per cent of the factory’s
flat roll steel goes to the U.S.
Now, it costs American buyers 25 per cent more to buy
that Hamilton steel.
The moment the shipment arrives at the border, the tariff
must be paid – or the truck will be denied entry. Technically,
the U.S. government says the purchaser must pay the fee;
however, Warrian said buyers and sellers will often split the
cost of the tariffs.
Pricing pinch
The three biggest consumers of steel (in order) are the automotive,
construction and energy sectors.
Warrian said the deep foundation construction industry
may in fact be more affected by Canada’s retaliatory tariffs,
which add 25 per cent to the cost of steel items imported
from the U.S.
“The piling industry may be seeing a major upward shift
in prices and cost,” he said. “That’s the real impact – the steel
tariffs have certainly raised the cost of steel to the end user.”
GYN9037 / 123RF
“No one has a
crystal ball, but
we can expect to
have elevated
steel prices for
an extended
period of time.”
– Peter Warrian
PILING CANADA 33
/profile_gyn9037
