{"id":40350,"date":"2025-02-28T15:41:44","date_gmt":"2025-02-28T15:41:44","guid":{"rendered":"https:\/\/businessdatalab.ca\/?post_type=publications&p=40350"},"modified":"2025-03-04T15:11:09","modified_gmt":"2025-03-04T15:11:09","slug":"back-to-the-future-u-s-imposition-of-steel-and-aluminum-tariffs","status":"publish","type":"publications","link":"https:\/\/businessdatalab.ca\/fr\/publications\/back-to-the-future-u-s-imposition-of-steel-and-aluminum-tariffs\/","title":{"rendered":"Back to the Future: U.S. Imposition of Steel and Aluminum Tariffs"},"content":{"rendered":"\n

On February 9, President Trump announced his intention to impose a 25% tariff on all imports of steel and aluminum. The following day, he signed an Executive Order<\/a> to implement these tariffs, which will take effect on March 12, 2025.<\/p>\n\n\n\n

This move essentially revives the \u201cSection 232\u201d tariffs enacted back in March 2018 during the first Trump administration. Initially, Section 232 exempted Canada but this exemption ended after a few months. Following this, Canadian steel exports to the U.S. dropped nearly 40% between May and June 2018, and have since recovered.<\/p>\n\n\n\n

Multiple countries, including Canada, implemented retaliatory tariffs, leading to higher input costs for manufacturers. The Canadian government retaliated<\/a> with equivalent tariffs on U.S. imports, covering steel, aluminum, and various consumer goods.<\/p>\n\n\n\n

After being in place for nearly a year, the tariffs were eventually lifted on Canada and Mexico in May 2019, around the ratification of the U.S.-Mexico-Canada Agreement (USMCA), though the Trump administration continued to threaten their reinstatement. Some global producers have faced ongoing tariffs and non-tariffs barriers.<\/p>\n\n\n\n

For Canada, these 2018 U.S. tariffs affected $16.6 billion worth of steel and aluminum exports. Ontario and Quebec \u2014 Canada\u2019s largest steel and aluminum producers \u2014 were disproportionately affected. Canada accounts for merely 1% of the global steel market and 5% of global aluminum market.<\/p>\n\n\n\n

Steel and aluminum tariff timeline<\/span><\/h2>\n

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Source: Business Data Lab based on Peterson Institute for International Economics.<\/span><\/h6>\n\n\n\n
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How much Canadian steel and aluminum does the U.S. import?<\/h1>\n\n\n\n

In 2024, Canada exported approximately $7.1 billion USD worth of steel and $9.4 billion USD worth of aluminum to the U.S., accounting for 23% of total U.S. steel imports and 53% of total U.S. aluminum imports. While steel represents a significant portion of total U.S. imports, the country depends far more on Canadian aluminum to meet domestic demand.<\/p>\n\n\n\n

The integrated nature of North American supply chains means that American auto makers and manufacturers source cost-effective and reliable steel and aluminum from Canada. Canada has a competitive advantage in aluminum production due to lower energy costs relative to the U.S. and smelting capacity. The U.S. industry has shifted its production from primary aluminum, to recycled and scrap aluminum.<\/p>\n\n\n\n

U.S. imports of steel and aluminum, by source<\/span><\/h2>\n\n\n\n
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Source: Business Data Lab calculations using U.S. ITA Steel and Aluminum Monitors.<\/span><\/h6>\n\n\n\n
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The economic impact of tariffs on Canada<\/h1>\n\n\n\n

Canada is the country most affected by U.S. steel and aluminum tariffs, with steel and aluminum export exposure (as a percentage of GDP) more than two times the nearest exposed supplier (Steel and aluminum exports from the UAE represent 0.35% of their GDP). That said, steel and aluminum exports account for only about 1% of Canada\u2019s GDP in 2023.<\/p>\n\n\n\n

While the broader economic impact of steel and aluminum tariffs is limited, local effects \u2014 such as employment losses due to reduced U.S. demand, as caused by the 2018 tariffs \u2014 could be significant. Canadian aluminum mostly comes from Saguenay, Quebec, with some capacity in Kitimat, British Columbia. Most steel in Canada is produced in Hamilton and Sault Ste. Marie, Ontario.<\/p>\n\n\n\n

While it\u2019s important to diversify to international markets, U.S. protectionism could have impacts to other trade partners and slow overall global growth. This could reduce the demand for Canadian goods.<\/p>\n\n\n\n

Retaliatory tariffs on U.S. imports could raise prices for Canadian consumers and lead to higher costs of intermediate goods (i.e. steel and aluminum) for manufacturers. However, the overall impact on inflation would be modest, as only 13% of Canada\u2019s consumer price basket is affected by imported goods. The Business Data Lab estimates that $2.6 billion in export value was lost due to previous tariffs compared to pre-tariff levels ($16.6 billion).<\/p>\n\n\n\n

Canadian exports of 2018 tariffed  steel and aluminum to the U.S.<\/span><\/h2>\n\n\n\n
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Source: Business Data Lab calculations using Statistics Canada data.<\/span><\/h6>\n\n\n\n
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The economic impact of tariffs on the U.S.<\/h1>\n\n\n\n

The Peterson Institute for International Economics found<\/a> that the 2018 tariffs imposed significant costs on the U.S. economy with little benefit. Key findings include:<\/p>\n\n\n\n