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Trump administration slaps tariffs on Canadian steel and aluminum

U.S. Secretary of Commerce Wilbur Ross says tariffs are a response to "lack of progress" in NAFTA negotiations.

by Vanmala Subramaniam
May 31 2018, 2:44pm

Canadian Press Images

The U.S. is slapping Canada with hefty tariffs on steel and aluminum imports effective June 1, escalating the trade war between both countries that are currently locked in NAFTA negotiations.

During a morning call with reporters, the Trump administration announced that it would no longer be extending the tariff exemption Canada and Mexico had been privy to up until May 31 — by midnight both countries will be subject to a 25 percent tariff on steel and a 10 percent tariff on aluminum imported into the U.S.

In the call, U.S. Secretary of Commerce Wilbur Ross alluded to the lack of progress in NAFTA renegotiations as a key reason why the Trump administration made the decision to eliminate the exemption Canada was given on metal tariffs. “The talks are taking longer than we had hoped, there is no longer a very precise date as to when they will be concluded.”

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Canada’s foreign minister Chrystia Freeland cut short her trip to Washington where NAFTA negotiations were taking place in order to deal with this latest trade spat. On Wednesday, Freeland reiterated that the metal tariffs issue was “entirely separate” from NAFTA negotiations and that tariffs were “entirely inappropriate” given the high level of integration between the metal industries of both the U.S. and Canada.

Canada has yet to announce a retaliation plan, common when countries are embroiled in trade wars. The imposition of steel and aluminum tariffs by the U.S. on the EU for example, led to the Europeans threatening to impose tariffs on goods like bourbon and Harley-Davidson motorcycles — strategic targets that affect Kentucky and Wisconsin, the home states of key Republican senators.

“I see the U.S. move as a negotiating tactic: I don’t see these tariffs being durably set in place,” Scotiabank Senior Economist Brett House told VICE News. “The U.S. is too dependent on foreign steel and aluminum, especially from Canada.”

Companies in the U.S. that purchase steel and aluminum from Canada are bound to see their costs go up substantially starting June 1. A vast number of American industries — auto manufacturers and beer brewers for example, depend heavily on steel and aluminum. And since America does not produce enough of both metals to meet local demand, they rely significantly on Canadian imports. In 2017, for instance, the U.S. imported 26.9 million tonnes of steel — 16 percent, or the largest amount, came from Canada.

“Canada’s response to these tariffs should be targeted and limited. Canada shouldn’t shoot itself in the foot by raising trade barriers and costs further. We need to remember that the gains from trade come from importing,” House added.

Canada’s steel industry is not as large as it used to be, but it still supports up to 100,000 jobs in the country, according to data from the Canadian Steel Producers Association.

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