As part of his move to impose tariffs on China, President Trump ended de minimis tariff exemptions, which previously allowed US consumers to import goods valued under $800 without paying tariffs. This came as a shock to many shoppers, who suddenly saw tariff charges added to their bills from retailers like Temu and Schein. The visibility of these tariffs made it clear to consumers that, ultimately, they—not foreign exporters—bear the cost. The President has since (temporarily?) reversed this rule change, along with planned tariffs on goods from Colombia, Mexico, and Canada.
This weekend, the President announced a 25 per cent tariff on steel and, when questioned by a reporter, confirmed that a similar tariff would apply to aluminum. Unlike tariffs on consumer goods, those on steel and aluminum are less visible to end consumers, making them more likely to endure. The same is true for bulk imports from China, which often decline in price—meaning tariffs may slow deflation rather than directly drive price increases. While economically negative, their impact on second-round prices is likely to be more limited, making them more politically sustainable.
For Canada, this feels like a replay of 2018. That year, the US imposed a 25 per cent tariff on steel and a 10 per cent tariff on aluminum. Steel prices spiked nearly 20 per cent, while aluminum prices rose about 10 per cent, before easing in 2019 as demand weakened. For example, production slowed at iron and steel mills, as well as at firms processing purchased steel.
From a manufacturing standpoint, the challenge is clear: US steel mills employ just 85,000 people, and aluminum producers just 58,000, while fabricated metal producers—who rely on these raw materials—employ 1.43 million. In effect, tariffs on steel and aluminum disadvantage millions of American manufacturing workers to benefit an industry that employs fewer than 150,000.
Canada, the largest supplier of steel and aluminum to the US, is expected to respond with targeted retaliatory tariffs on key US exports, such as orange juice and Kentucky bourbon.
Within Hamilton, Canada’s steel hub, the two major steel operations serve two distinct market segments—ArcelorMittal focuses on specialized steel products, while Dofasco focuses mainly on producing coking steel. Both companies successfully weathered the last round of tariffs, but sustained tariffs could drive up costs for domestic fabricated metal shops, leading to broader economic consequences. These ripple effects could extend to employment and potentially lead to secondary effects in the housing market.
Aluminum smelting in Canada depends on access to deep water ports to receive bauxite shipments and sufficient low-cost electricity. Smelters are concentrated along the north shore of Quebec, with one located in northern BC. While sustained tariffs could affect these operations, the economic impact would likely be localized to these remote communities.
While the latest round of US tariffs may be politically strategic, their economic consequences will extend far beyond steel mills and aluminum producers. For Canada, the stakes are high. As trade tensions escalate, so too does the likelihood of targeted Canadian retaliation, adding further uncertainty to an already fragile economic landscape.
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