Could Trump tariffs on steel exports kill the Canadian steel industry?
“I think we’re really looking down the barrel,” said Francois Desmarais, vice-president of Trade and Industry Affairs for the Canadian Steel Producers Association (CSPA).
Desmarais made those remarks just days before U.S. President Donald Trump announced Washington will be imposing 25 per cent tariffs on all steel and imports to the U.S., including from Canada, on March 12.
“I don’t want to think about or entertain losing access to the market,” said Desmarais.
Depending on the year, 50 to 60 per cent of Canadian steel output goes across the border.
“We export more to the U.S. than we consume in Canada,” said Desmarais.
The North American steel industry is a part of a highly integrated economy that sees $20 billion in steel trade back and forth between the two countries.
During the first Trump administration, Canadian steelmakers were able to withstand U.S. tariffs in 2018-19. This time around, Desmarais said it’s looking bad for business on both sides of the border because of the threat of tariffs being applied on all Canadian exports to the U.S.
“It hurt us a lot. We survived (in 2018), barely, with the help of the Canadian government and with retaliation tariffs on U.S. steel,” said Desmarais. ”This time around our customers (in the U.S.) are also dragged in.”
For U.S. consumers, it not only increases the price of a vehicle, but all the Canadian-made parts that go into its manufacturing.
“That will be very painful for us. Way worse.”
Should steel tariffs remain in place for any length of time, Desmarais expects disruption to many U.S. buyers, especially those in the automotive, construction and energy sectors.
Canadian-produced steel pipe — the kind rolled at Tenaris in Sault Ste. Marie — ends up in Oklahoma and Texas for oil exploration and extraction. With tariffs, those customers will buy less, activity will slow, and it will inflate the cost of energy projects, Desmarais said.
“The energy security of the U.S. will be at risk.”
For primary Canadian steelmakers, like Algoma Steel in the Sault, that procure raw materials — in iron ore, coal and limestone —from U.S. mining companies, that could mean job losses there if struggling steel companies buy fewer commodities.
As to how soon tariffs could impact the steelmakers themselves in the form of plant shutdowns or production curtailments, Desmarais couldn’t speak to that, except to say the entire industry is under a “lot of pressure.”
“We can’t just idle a blast furnace or an EAF (electric arc furnace). You just can’t turn it on and off.”
Algoma Steel in Sault Ste. Marie didn’t respond to queries from Northern Ontario Business, but did talk strategy to SooToday.
Same goes for pipemaker Tenaris in the Sault. A spokesperson declined comment, saying that the manufacturer is in a “quiet period,” at least until its Feb. 20 investors meeting.
“If our products are tariffed going into the U.S., we don’t see why American products coming into Canada should have a free pass,” said Desmarais.
But instead of a cross-border trade war, Desmarais said both countries should be collaborating to align its policies to face unfair trade practices, such as the chronic issue of foreign-dumped steel in North America.
More than 40 per cent of the steel consumed in Canada comes from offshore. In Canadian Trade Tribunal cases, steel makes up 60 per cent of all the anti-dumping and countervailing duties imposed.
A big problem for Canadian companies remains that there’s overcapacity in global steel production at 2.5 billion tonnes. The world consumes about 1.8 billion tonnes.
Steel exporters like China, which has a massive state-sponsored industry, ships offshore more than 100 million tonnes of cheaply made steel — six or seven times more than Canadian production alone. It’s to the point where 50 per cent of Brazil’s steel consumption comes from China.
“They can wipe out domestic industry all around the world,” said Desmarais.
Going forward, the CSPA wants the feds and Canada Border Services Agency to consistently apply, and beef up, its trade remedy tools to stem the tide of offshore imports that flood the market and threaten the Canadian industry’s integrity.
Last year, the CSPA was pleased Ottawa applied Section 53 of the Customs Tariff, considered an aggressive measure, to impose a 25 per cent surtax on Chinese steel and aluminum products to level the playing field against what the government called unfair Chinese trade strategy and practices.
The CSPA has been pushing for amendments to anti-circumvention legislation for years to stop offshore producers from avoiding tariffs.
“We’re asking for a smart mechanism that could help us weather the storm right now,” Desmarais said.
Should trade barriers go up, he said they’ll also be looking for government support in the form of a cost-recovery mechanism for those steelmakers exporting to the U.S., and also to assist those cash-strapped steelmakers forced to halt any major capital projects.
“Much more will need to be done to make sure that those investments move forward and we keep a domestic industry in this country."
To gain a bigger share of the domestic market, he suggests Ottawa mandate Canadian content rules to include steel and other materials on all publicly funded infrastructure projects.
The idea was bandied about two, three years ago by the feds in consultation with industry, but was never implemented.
“They were looking at, why should Canada remain an open country for foreign companies to come, compete, and win contracts here when our own companies don’t have access to their (foreign) market.
“Having massive infrastructure projects paid by taxpayers and going to foreign companies, maybe it’s time to review those positions.”
While it won’t offset having unfettered access to the U.S., but it will help offset some of the losses and “keep the lights on” at steel mills while negotiations take place, he said.
Desmarais said that’s not about being protectionist, but protecting the industry and the market.
“Right now there’s not that many fair traders, especially in the steel sector.”
He said political talk of knocking down interprovincial trade barriers is not a topic that’s been brought up to him by their members.
“We definitely would love to see more consumption of Canadian steel across the country, understanding that 75 to 80 per cent of steel is produced in Ontario, but having reciprocity in trade, reciprocal procurement, that would certainly increase our domestic consumption and that should be something to explore for us.”