Trump’s steel and aluminum tariffs will hurt U.S. as well as Canada

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The United States slapped Canada with hefty tariffs of 25 per cent on steel and 10 per cent aluminum on Thursday — a move that could make Canadian consumers pay more for cars, refrigerators, boats, canned goods and beer – just to name a few commodities.


The Trump administration’s decision to impose these tariffs ignores the truth about Canada’s relationship with the U.S. and the move could cost the Canadian economy around US $3.2 billion each year.


The tariffs were originally announced on March 1 when U.S. President Donald Trump said that the United States was being treated unfairly. He said the import taxes will help protect American jobs and boost the U.S economy.  The Trump administration cited national security interests for implementing the tariffs, saying the military needs a domestic supply for its tanks and ships.


Trump is expected to get around free-trade obligations between the two countries using a U.S. law that allows him to introduce the tariffs for reasons of national security.


The Trump administration’s argument that Canada and Mexico pose national security threats to the United States, therefore justifying the tariffs. 


Canadian Prime Minister Justin Trudeau has called the statement “insulting” and referred to it as an “affront” to Canada’s longstanding trade relationship with the U.S.


“It just makes no sense to highlight that Canadian steel or aluminium could be a security threat to the United States,” he said.


Canada, Mexico and the EU were all granted a temporary exemption from the tariffs when they were first announced, but that expires Friday.


Canada is the biggest supplier of steel and aluminum to the U.S., and exports nearly 90 per cent of its steel to the U.S. — more than any other country, according to the Canadian Steel Producers Association.


“The benefit of free trade is gone here,” Walid Hejaz with the Rotman School of Management at the University of Toronto said. “What’s going to happen to the price of steel and aluminum? The price is going to rise and jobs will be lost.”


“Canada has been held hostage to American policy,” he said. “And with the new 25 per cent tariff, U.S. demand for Canadian steel will fall dramatically.”


Steel is produced in five provinces, employing around 22,000 people across Canada with the majority of production concentrated in Ontario.


Hamilton – which is often dubbed Steel City – has about 10,000 residents working in the industry. It produces about a third of the Canadian steel that’s exported to the U.S.


Keanin Loomis, CEO of the Hamilton Chamber of Commerce, explained why that’s significant. “That represents about $2 billion in local procurement, and conservatively that means there are about 30,000 other jobs that are reliant upon the steel industry here in Hamilton. Just in Hamilton!”


Loomis pointed to the last time the U.S. imposed tariffs on Canadian steel imports, which occurred under former president George W. Bush. “They were quickly reversed after the negative downstream effects on the American economy became apparent,” he said. “This has been tried before. It failed. It would be foolish to try … this again.”


According to the Aluminum Association of Canada, Canada exports to the U.S. around 84 per cent of the 3.2-million tonnes of aluminum it produces annually, which represents two-thirds of America’s total aluminum imports. There are close to 8,300 jobs in the aluminum sector in Canada — and a majority of them are in Quebec.


The tariffs will be felt most heavily by workers and consumers in the United States as the “collateral damage” spreads throughout the American economy in the form of higher prices and stunted growth, said Jean Simard, head of the Aluminium Association of Canada.


Canada’s metal producers are urging the government to push back against an American plan to slap steep tariffs on aluminum and steel imports, saying they are being unfairly targeted in a sweeping strategy aimed at protecting U.S. companies from state-sponsored Chinese producers.


“We’re not part of the problem,” Simard said. “The problem is China and the U.S. knows it.”


In response to these measures, Canada intends to impose its own tariffs on imports of steel, aluminum, and other products from the U.S. According to sources, the Canadian government is asking for input on its proposed list of target products. The Canadian Chamber of Commerce would encourage members  to review the list and provide the federal government with comments.


The retaliatory measures from other countries — including Canada, who imposed C$16.5 billion worth of tariffs on American products in response — could significantly magnify the impact the Trump administration’s tariffs on aluminum and steel imports could have on American jobs.


A report released Tuesday by the Washington-based trade and economic consulting firm Trade Partnership Worldwide LLC claims that for every steel and aluminum job saved by the Trump administration’s tariffs on imports, 16 more will be lost.


“Basically, the report finds that the tariffs would increase employment in the steel and the aluminum sectors, but what it shows pretty clearly is that a large number of other workers would lose jobs in the process as higher steel costs ripple through the economy,” said Laura Baughman, one of the report’s authors.


The report this week, claims over U.S. 400,000 jobs will be lost in other sectors of the economy due to higher prices on steel and aluminum. The industry that could be most impacted, with over 375,000 jobs lost, will be the services sector.


“Services sectors will see large employment declines. You wouldn’t expect that when you’re putting a tariff on steel and aluminum that it would have that big of an impact on services sectors but it does. People lose their jobs, so they stop spending money on services,” said Baughman.


In addition, almost 7,000 jobs will be lost in agriculture and 20,000 jobs will be lost in manufacturing, and almost 1,000 lost in the energy sector, for a total of 402,445 jobs, the report said.


Baughman goes on to say that Canada may not be immune from economic impacts and job losses as a result of these tariffs, due to the close relationship between the Canadian and American steel industries.


“The U.S. is, of course, a very large market for Canadian steel and aluminum. So, there are ripple effects back to the Canadian industries as well,” she said. “Those higher costs will ripple through to Canadian consumers as well, and will cut household spending, which will have ramifications for services and related sectors in Canada.”


Baughman expanded on the Trump administration’s argument that Canada and Mexico pose national security threats to the United States, therefore justifying the tariffs. 


She explained that the administration is referring to national security as being impacted by the country’s economic instability. “If the economy is unstable, Trump officials argue, the U.S. is also vulnerable on a national security basis,” she stated.


“I don’t think they think Canada is a threat to U.S. national security. I think they think imports from Canada is a threat to U.S. economic security and that in turn is a threat to its national security.”


– with files

Posted on:
Monday, June 11, 2018