A 30-day pause on U.S. tariffs, and a potential trade war, is a welcome reprieve for the Canadian steel industry, including major producers in Hamilton, which would otherwise be like “a punch in the face,” says one expert.
With materials crossing the U.S.-Canada border multiple times during steel production — plus Canada’s reliance on the U.S. companies buying its steel — the local industry has a lot to lose if 25 per cent blanket tariffs are imposed by President Donald Trump, said Goran Calic, an associate professor at McMaster University.
“We will see the very high price of this very, very quickly,” said Calic, who specializes in strategic management and is a visiting scholar at Harvard Business School.
“Americans might not even notice, and if they do, it’ll be fractional.”
About half of Canadian steel is exported and 90 per cent of it goes to the U.S., while steel from Canada accounts for only a quarter of what the U.S. imports., Calic said.
Hamilton is considered to be a steel hub in Canada, says the federal government’s website. The Ontario city is home to one of the highest concentrations of steel manufacturing activity in the country and the largest flat steel producer, ArcelorMittal Dofasco.
Stelco is the second biggest steel company operating in Canada and also runs a plant in Hamilton.
Ontario would also be disproportionately impacted by tariffs. Six of Canada’s 13 steel plants operate in the province, says Natural Resources Canada.
Tariff threat still looms
A last-minute deal Monday afternoon between Trump and Prime Minister Justin Trudeau means a likely trade war has temporarily been averted for at least 30 days.
Prior to the pause, Trump had signed an executive order putting a 25 per cent tariff on all Canadian goods and a 10 per cent tariff on energy from its northern neighbour. Trudeau reacted by promising 25 per cent in retaliatory tariffs on $155 billion of American products.
Mexico also got a reprieve from a similar tariff threat, while Trump’s 10 per cent tariffs on goods from China proceeded and went into effect Tuesday.
If tariffs against Canada go ahead in March after the 30-day reprieve is up and no final plan is in place, the cost of producing steel in key places like Hamilton would shoot up, Calic said. American companies may look for cheaper options, like steel produced in Brazil, as they increase the amount produced domestically.
But for Canada-based steel companies, it would be a “massive problem,” said François Desmarais of the Canadian Steel Producers Association (CSPA).
“We cannot diversify and go elsewhere,” said Desmarais, CSPA’s vice-president of trade and industry affairs.
Besides the far distance between Canada and potential European or Asian customers — and the fact that steel is heavy and therefore expensive to transport — there’s already overproduction of steel globally, he added. That means new customers would be hard to find.
If a trade war happens, Canadian steel producers will need government help to avoid layoffs, said Desmarais.
CPSA represents 15 companies worth $15 billion, says its website. They produce about 13 million tonnes of steel products in Canada a year, directly employing 23,000 workers.
‘Highly integrated’ supply chain
Throughout steel production, materials crisscross the U.S.- Canada border.
It starts with components like iron ore, coal and coke needed for steel production, and often imported from the U.S., Desmarais said.
Those elements are used to make steel at places like ArcelorMittal Dofasco or Stelco, both in Hamilton.
Steel is then shipped to the U.S., where it’s converted into components for the automotive industry, for example, said Desmarais. Those components in turn are shipped back and forth between plants in each country as vehicles are assembled.
Although details remain scarce, Trump’s tariffs could apply each time these materials and components are shipped into the U.S., Desmarais said.
Canada’s auto industry is fearful of the toll 25 per cent tariffs will take, with some expecting to see work stoppages and shutdowns at both vehicle and parts manufacturers in southern Ontario.
Stelco owner supports tariffs
Cleveland Cliffs, an American company that bought Stelco last year, said in its fourth-quarter financial update Monday that the tariffs on Canada, Mexico and China would be welcomed.
“We look forward to continuing our work with the Trump administration on further tariff action to come on steel specifically, against our adversaries and allies who have taken advantage of our market,” said CEO Lourenco Goncalves, also president and chair of Cleveland Cliffs.
“A level playing field in steel will set the foundation to usher in a new golden era and a manufacturing renaissance that will make America strong again.”
The company has not responded to requests for comment about its plans for Stelco in Hamilton or how the tariffs could affect production there.
Hamilton’s largest steel producer, Dofasco, declined to provide a comment.
In the long run, tariffs aren’t necessarily a bad thing to spur domestic production, said Calic. But blanket tariffs as high as 25 per cent could mean there’s little steel industry left in Canada to realize those benefits, he added.
