Trump’s steel tariffs will hurt the U.S. much more than Canada

U.S. President Donald Trump’s proposal to slap high tariffs on steel and aluminium imports to America will have a more severe effect on American industries that it will on the Canadian economy, according to trade expert and Scotiabank’s deputy chief economist Brett House.

“The major impact of this will be seen in the U.S. They have 6.5 million workers in industries that use steel and aluminium, and only 140,000 workers in the actual steel and aluminium producing industries,” House told VICE Money.

“We know from past experience that Trump’s initial rhetorical position is always much stronger than what is actually done, so you have to first ask yourself if these tariffs are actually going to be imposed.”

This latest trade fiasco began late last week, when Trump abruptly announced a plan to slap 25 percent and 10 percent tariffs on steel and aluminium imports respectively.

“We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!” Trump tweeted on Friday, soon after announcing the proposed tariffs.

If imposed, that effectively means that companies in the U.S. that purchase steel and aluminium from Canada will see their costs go up substantially. A vast number of American industries — beer brewers, airplane and auto manufacturers, and companies that make machinery — depend heavily on steel and aluminium.

America does not produce enough of these two metals to meet local demand, hence relying significantly on imports. Canada, for its part, is the biggest exporter of both steel and aluminum to the U.S. In 2017, for instance, the U.S. imported 26.9 million tonnes of steel — 16 percent of it came from Canada.

Canada’s steel industry, despite being in decline, still supports up to 100,000 jobs in the country, according to the Canadian Steel Producers Association. Indeed, Canadian jobs could be affected if Trump actually does impose tariffs, but at the same time, U.S. industries that rely on steel and aluminium imports will have to find a way of purchasing the metals regardless.

“Look, of course the tariffs will affect Canada, somewhat. But where are companies going to get their steel and aluminium from? U.S. producers cannot suddenly ramp up production of steel and aluminium to meet demand because both industries are very capital intensive and aluminum is a very power-intensive industry, and you cannot just build production facilities overnight,” House argues.

Invoking NAFTA

But on Monday morning, Trump further hardened his stance on the tariffs by invoking the North American Free Trade Agreement as a bargaining chip.

“Tariffs on Steel and Aluminium will only come off if new and fair NAFTA agreement is signed. Also, Canada must treat our farmers much better. Highly restrictive,” Trump tweeted in the early hours of Monday morning.

Canada is currently in the seventh round of negotiating a new NAFTA agreement with the U.S. and Mexico, a negotiation that has been riddled with spats and severe uncertainty.

The President’s Monday morning tweets only serve to complicate that situation, with Canada’s Finance Minister Bill Morneau calling Trump’s stance a “disadvantage for American businesses” and a “disadvantage from a security standpoint as we see Canada as a staunch ally of the United States.”

What Canada is ultimately seeking, with regards to steel and aluminium tariffs, is an overall country exemption, one that the government believes should apply to Canada in particular because of the highly integrated nature of the North American steel market.

But on the Sunday morning cable news talk shows, Trump’s top trade advisor Peter Navarro was quick to dismiss that notion. “There’s a difference between exemptions and country exclusions. There will be an exemption procedure for particular cases where we need to have exemptions so that business can move forward, but at this point in time, there will be no country exclusions.”

Commerce Secretary Wilbur Ross echoed those thoughts. “Trump has made a decision at this point. If he for some reason should change his mind, then it will change. I have no reason to believe he’s going to change his mind,” Ross told NBC’s Meet the Press.

For her part, Foreign Affairs Minister Chrystia Freeland tweeted that she had had a discussion with Texan Republican Rep. Kevin Brady about the U.S-Canada trade relationships, although no specific details of that discussion were mentioned.

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