Steel and Aluminum Tariffs: What This Means for Canada

While Canada and Mexico originally received an indefinite exemption from the steel and aluminum tariffs proposed by President Trump, a new presidential order added a number countries to the exemption list, along with a May 1st expiry date for all exemptions. Every country seeking a permanent exemption is being asked to negotiate separate arrangements with the U.S.  In the case of Canada and Mexico, the U.S. is explicitly tying the issue to the North American Free Trade Agreement (NAFTA).  Coincidentally, the original expiry date coincides with the last date for finalizing a new NAFTA this year.  Due to pressure from Canada and Mexico, President Trump has delayed their expiration to June 1st while he finalizes NAFTA deals.  If the exemption expires on June 1st, what does this mean for Canada?

Canada’s Economy

Canada exports nearly 90 percent of its steel to the United States, while it accounts for 16 percent of all U.S. steel imports, the most of any country. It also accounts for 41 percent of America’s aluminum imports.  Putting a 25 percent tariff on steel and 10 percent tariff on aluminum should make goods in other sectors, such as auto, defense and aerospace, more expensive to produce and pricier to buy. If that happens, both companies and consumers may spend less in other areas, which could start a ripple effect to other sectors.

Trade in Canada

One of the biggest questions that everybody has is, how will tariffs affect NAFTA?  Unfortunately, this question likely won’t be answered any time in the foreseeable future.  US President Donald Trump recently tweeted, “We have large trade deficits with Mexico and Canada. NAFTA, which is under renegotiation right now, has been a bad deal for U.S.A. Massive relocation of companies & jobs. Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed. Also, Canada must treat our farmers much better.”

Connecting the removal of tariffs to NAFTA has not gone over well with Canada.  The Canadian Press released a statement from Canadian Foreign Affairs Minister Chrystia Freeland.  She stated that Canada will not be bullied or pressured by the United States as part of those talks. “These are two separate tracks and in the NAFTA negotiations Canada will not be subject to any type of pressure,” she said. “This episode has not changed our NAFTA negotiation position.”

What Can You Do?

Contact your Member of Parliament and urge commitment to maintain a strong trade relationship with the United States. Furthermore, it is imperative to advocate for permanent exemption from U.S. steel and aluminum tariffs, in efforts to avoid detrimental, economic harm to both Canada and the United States.

For more information on Canadian Foreign Affairs Minister Chrystia Freeland’s thoughts on the proposed tariffs, please click here.

For further information on the article, please contact Director of Government Relations – Alexis Strieker at astrieker@equipmentdealer.org