Trump is imposing tariffs on steel and aluminum — again. What have we learned from last time?
New tariffs may have more of an impact this time around
On Monday evening, U.S. President Donald Trump slapped 25 per cent tariffs on all steel and aluminum imports, a move which affects Canadian producers of those materials — again.
Ahead of the announcement, some experts, political leaders and business leaders said Trump's tariffs threat gave them a tinge of déjà vu.
During his first term, Trump imposed a 25 per cent surtax on steel imports and 10 per cent on aluminum. This time, he said both aluminum and steel are subject to the 25 per cent rate.
It's an anxiety-inducing reality for some Canadian companies. In 2023, Canada exported more than $20 billion worth of steel and $15 billion of aluminum to the U.S. In 2018, the last time tariffs were imposed, Canada's metal producers took a hit. Demand from American buyers dropped.
Bruno Montgrain, the vice-president and co-owner of ALU MC3, a Montreal-area manufacturer of aluminum products, including light poles, said the new tariffs would "essentially cut us off from the American market."
"It wouldn't be good for us at all," he said ahead of Monday's announcement.
The original Trump tariffs only affected raw materials, he said, not products made of aluminum and steel. But he said it appears Trump's new threat is much broader.
"It's kind of a wake-up call to look at other markets and not be so dependent on the U.S. market," he said.
But experts say the geographic proximity of the U.S. and the integration of their economy with ours facilitates trade to such an extent that even after the costly tariffs during Trump's first term, Canada — and Quebec — did not look to find other markets.
"If we look at the percentage of aluminum exports from Canada or Quebec to the United States, I sense that we haven't learned a lesson," said Vivek Astvansh, an associate professor of quantitative marketing and analytics at McGill University.
"The dependence of [Canadian] aluminum producers on the United States has remained the same and marginally increased, and we have not been able to find substitute markets or countries where these aluminum products can be exported."
Astvansh said one of the reasons Canada had perhaps not diversified after the first Trump tariffs was that they only lasted for a year. The U.S. lifted them in 2019 when the countries agreed to negotiate a new trade agreement.
This time, the uncertainty surrounding the tariffs appears to have galvanized Canadian political leaders and businesses to seek other markets.
"We should understand that our extreme dependence on the United States will always expose us to these threats and increase uncertainty," said Diya Jiang, a PhD candidate at McGill University's department of political science, with expertise in Canada-U.S. relations.
"So in the medium to longer term, the industries should be able to decrease the dependence and strive for equitable distribution of our exports to different countries so that we cannot be held hostage by one or two countries."
But diversifying markets comes with its own challenges, particularly for sectors like aluminum and steel production. Not only is Canada geographically close to the U.S., it also has similar regulatory standards, Jiang said.
To export products to Europe, for example, Canadian companies would have to compete with companies that are already integrated into the European market. They would also have to contend with new regulatory hurdles and the cost of shipping products overseas.
"All of that kind of adds to the cost for diversifying," Jiang said.
Quebec is particularly vulnerable to Trump's aluminum tariff. The province is home to multiple aluminum smelters and relatively cheap electricity, a necessity for aluminum smelting and processing.
A recent Centre for Strategic and International Studies (CSIS) report said the U.S. produces less than two per cent of the world's primary aluminum, imports more aluminum from Canada than any other country and relies on Quebec's smelting capacity.
In response to Trump's tariff threats, Quebec Premier François Legault has said the province needs to diversify its export markets so it is not so reliant on the U.S.
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With files from Steve Rukavina and Kwabena Oduro