FEATURE
Higher steel and aluminum prices were cited by General
Motors as one reason for lowered profit forecasts in 2018. It’s
estimated the tariffs will cost the company $1 billion this year.
In June, GM warned that possible U.S. tariffs on imported
vehicles and an escalating trade war would lead to “less
investment, fewer jobs and lower wages.”
Then, GM announced on Nov. 26 that it would be closing
three North American plants, including the factory in
Oshawa, Ont., and reducing its salaried workforce by 15 per
cent in 2019.
The company’s CEO, Mary Barra, said GM is moving
toward electric and autonomous vehicles, and is acting
now to “stay ahead of fast-changing industry and
market conditions.”
Tariffs were not specifically mentioned as a cause of
GM’s restructuring.
Warrian said tariff wars never benefit anyone, but they
escalate quickly once they get started.
“Short term, people will find steel wherever they can,”
he said. “But with tariffs on both sides of the border, they
will have difficulty. They may look to source more steel in
Canada, but they will still be looking at serious increases in
steel prices.”
He added that steel prices in the U.S. have gone up by 43
per cent in the last six months. The recent low was US$429
per metric ton in May 2009, rising to US$1,006 in July 2018,
and then US$864 in November 2018.
“No one has a crystal ball, but we can expect to have
elevated steel prices for an extended period of time,”
said Warrian.
“U.S. consumers are now feeling that cost in their consumer
goods. It starts to feed through inflation. It’s probable
that higher prices have eased some of the direct pressure
from the tariffs, but higher prices can also put your customer
out of business. It’s very complicated, and it’s very complex.”
Canadian companies that buy construction steel are also
feeling the pinch.
To prevent the country from being flooded by cheap overseas
steel that was blocked from the U.S. by Trump’s tariffs,
the Canadian government imposed a further series of tariff
rate quotas on Oct. 25, 2018. The new measures apply to
seven classes of steel goods and shipment-specific import
permits are needed in order to exempt the shipper from a 25
per cent Canadian import tax.
The system is reportedly causing havoc when it comes to
importing construction-related materials such as rebar and
other steel products and is resulting in delayed or deferred
projects. It is becoming increasingly difficult for builders
to predict the price of basic materials and therefore bid for
future work with any certainty.
According to a Nov. 8 news release from the Vancouver
Regional Construction Association (VRCA): “At stake are
some 60,000 construction jobs across Canada according
to estimates prepared for the Canadian Coalition for
Construction Steel, with disproportionately higher impacts
likely for British Columbia because of how and where rebar
and related products must be sourced.”
VRCA said steel from the U.S. is more expensive to buy
since Canada imposed tariffs on July 1, and it is too expensive
to ship Canadian steel across Canada by road or rail. That
only leaves sourcing steel from Pacific Rim suppliers, which
is now more expensive due to safeguards.
“The combination of tariffs on U.S. steel imports and safeguards
on non-U.S. steel imports is a double whammy for
B.C.’s construction industry and will result in higher prices,
supply restrictions and delayed or deferred projects in the
B.C. marketplace,” said Fiona Famulak, VRCA president.
Meanwhile, experts say the path out of the steel and aluminum
trade war likely involves some sort of quota system
– and of course, that will take time to negotiate.
Preparing for tomorrow
Now that Canada has negotiated the best deal it can with
USMCA, it’s time to look inward, suggested Warrian.
“The barriers to inter-provincial trade within this country
are a bigger problem than international tariffs,” he said.
“We must have a grown-up conversation about the barriers
to trade and mobility within Canada – they are economically
a bigger cost issue than the American tariffs are. We have to
look ourselves in the eye.
“The second thing we can do is look at our education and
training – are we getting ready to use the latest technology?”
The topic of interprovincial trade was also on the agenda
for the First Ministers’ Meeting in Montreal on Dec. 7, where
Prime Minister Trudeau was expected to discuss the issue
with provincial premiers from across the country.
According to a federal government press release, trade
between provinces and territories accounts for just under
one-fifth of Canada’s annual GDP, or $370 billion. It also
accounts for almost 40 per cent of all provincial and territorial
exports.
Estimates suggest that removing interprovincial trade
barriers could result in an economic benefit roughly comparable
to the projected benefit of the Canada-European Union
Comprehensive Economic and Trade Agreement.
As Warrian said, economic opportunities exist if one
knows where to look.
“The positive part of that is we are not hostages to tariffs.
We can influence our own destiny,” he said.
Experts say the path out
of the steel and aluminum
trade war likely involves
some sort of quota system
– and of course, that will
take time to negotiate.
34 Q4 2018 www.pilingcanada.ca
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