Canada is vowing to retaliate if U.S. President Donald Trump makes good on his pledge to impose steep tariffs on steel and aluminum producers -- while holding out hope that it could be exempt.
Trump said he intends to slap a 25 percent duty on steel imports and 10 percent on aluminum in order to protect the national industry, though details remain unclear. His words sent U.S.-based producers rallying but could hurt companies that ship steel and aluminum from Canada, including Rio Tinto Group and Stelco Holdings Inc., without an exemption.
Foreign Minister Chrystia Freeland said that Canada buys more than half of American steel, resulting in a $2 billion surplus for the U.S. She also said it’s “entirely inappropriate” for the U.S. to consider the country a threat to national security.
“We will always stand up for Canadian workers and Canadian businesses,” Freeland said Thursday in a statement. “Should restrictions be imposed on Canadian steel and aluminum products, Canada will take responsive measures to defend its trade interests and workers.”
Businesses with steel and aluminum operations in Canada were also swift to respond.
‘Trade War’
“The President has just initiated an all-out trade war,” said Jean Simard, chief executive officer of the Aluminum Association of Canada. Aside from the direct impact on the countries affected, Europe will need to protect itself from a flood of redirected metal because the U.S. is not an open market anymore, he said.
“We have to keep hoping” for an exemption for Canada, Simard said.
London-based Rio Tinto, which ships more than 1.4 million metric tons of aluminum to the U.S. annually from Canada, said it will continue to lobby Washington for an exemption given the highly integrated Canada-U.S. market for autos and other manufactured goods.
“Aluminum from Canada has long been a reliable and secure input for U.S. manufacturers – including the defense sector,” Rio Tinto spokesman Matthew Klar said by email. “We will continue to engage with U.S. officials to underscore the benefits of the integrated North American aluminum supply chain, including the jobs it supports on each side of the border.”
Stelco Drops
Shares of Canadian steel producer Stelco Holdings fell as much as 6.1 percent. The U.S. accounted for about 14 percent of Stelco’s sales in the last six months of 2017, though the American auto industry is a major growth target for Chief Executive Officer Alan Kestenbaum. He said on the company’s earnings call last week that he was hopeful Canada would be exempt from the tariffs.
Joseph Galimberti, president of the Canadian Steel Producers Association, said his organization has been “pushing hard” for an exemption. The U.S. hasn’t yet indicated if any countries will be excluded. A tariff would hurt Canadian producers in two ways: by raising costs for buyers in the U.S. while also potentially diverting other steel production to flood Canada’s own market, he said.
“If Canada’s not actually exempted, if a 25 percent tariff is imposed, the government is going to have to be equally reactive in terms of what they do from a domestic policy perspective,” Galimberti said.
U.S.-based aluminum producer Alcoa Corp., which has operations in Canada, said certain countries should be excluded from the duties.
“We believe vital trading partners, including Canada, should be exempt from any tariff on aluminum,” Alcoa said in an emailed statement. “The aluminum industry has an integrated supply chain and actions should not penalize those that abide by the rules.”
To contact the reporters on this story: Danielle Bochove in Toronto at dbochove1@bloomberg.net, Josh Wingrove in Ottawa at jwingrove4@bloomberg.net, Kristine Owram in Toronto at kowram@bloomberg.net.
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, David Scanlan at dscanlan@bloomberg.net, Steven Frank
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