The Trump Administration has decided to impose S. 232 tariffs on Canadian aluminum exports.
The rumour had floated in the media for many weeks but news of the official decision was made by the President. For southern Ontario, the impact will be minimal in the immediate term as there are no primary producers of aluminum in the province. Most of Canada’s aluminum producers are in British Columbia and Quebec. The reaction to this escalation was dramatic, with Deputy Prime Minister Chrystia Freeland using the term ‘war’ to describe the situation we now face. Premier Doug Ford also responded firmly, urging people to buy Ontario products and services and pointing to his Made in Ontario campaign.
Over 11,000 jobs in fabricated metal production were lost in the U.S. last month, a figure which likely spurred the President to make the move. However, the U.S. only produces a fraction of the aluminum it consumes (20-30%). Most of the gap is imported from Canada. The tariffs will mean that U.S. consumers and businesses will now have to pay more for a basic commodity. The move will also hurt North American defense, as aluminum is a key material in the production of various forms of military equipment. The U.S. Chamber of Commerce and the U.S. Aluminum association have come out strongly against the move:
The U.S. Chamber of Commerce said “bringing back these tariffs would be like a bad horror movie. Most of the U.S. aluminum sector opposes them, and they’ll hurt American manufacturers who use aluminum as an input.”
The Aluminum Association, which represents more than 120 U.S. companies across the entire industry value chain, said: “this dynamic is hurting aluminum workers today” and “efforts to ‘Blame Canada’ miss the mark.” They’ve also noted that imports of primary aluminum from Canada today are consistent with long-term trends, long pre-dating the imposition of Section 232 tariffs in 2018.
The re-introduction of tariffs means further measures like this to our steel sector are possible from a President who polls say is on course for a defeat at the hands of Joe Biden. We may even see tariffs applied to a broader basket of sectors in the next few months. It’s also important for people to note that a Democratic win would not see the tariff issue go away. Senior Democratic Senator Chuck Schumer has complained about Canada’s dairy sector. As the U.S. continues to face economic and financial difficulties, it will do what all states under pressure do – squeeze their neighbours. The implications to the broader Canadian economy and southern Ontario real estate could be interesting if further measures are implemented.