As tariffs and countermeasures were placed on steel and aluminum products, one expert says the trade war is not likely to spur U.S. production of those materials and concessions offered by Canada could be a path to success.
On Wednesday, Canada levelled reciprocal dollar-for-dollar tariffs on U.S. steel and aluminum imports, responding to U.S. President Donald Trump’s 25 per cent tariffs on steel and aluminum that came into effect that same day. Ottawa’s countermeasures took effect as of 12:01 a.m. Thursday, hitting $29.8 billion of U.S. goods.
Shaz Merwat, energy lead at the RBC Climate Action Institute, said in a report Wednesday that Canadian exports of the two metals, valued at $24 billion a year, are subject to the tariffs. He added that in 2018 tariffs did not “meaningfully expand American steel and aluminum production capacity,” noting that both rose by seven and four per cent respectively.
“This scenario will likely repeat itself. The U.S. steel industry is impeded by a far bigger challenge as China floods global steel markets with excess production capacity, ultimately hindering U.S. producers’ ability to boost domestic output,” the report said.
“This global oversupply reached 560 million tonnes (six times U.S. consumption) in 2024, with a further 157 million tonnes of carbon-intensive capacity additions set to come online by 2026, mostly from Asian countries.”
Merwat said that for “all the China talk, Canada has become target number one.” Canada’s exports of steel and aluminum to the U.S. have risen by 35 per cent to US$17.7 billion since 2018, according to the report.
“That pace of growth is greater than the global average, with the most recent years far surpassing historical Canadian growth rates. As a result, Canada’s steel and aluminum trade surplus with the U.S. has more than doubled from 2018 to more than US$9 billion last year,” the report reads.
Merwat also highlighted that it is unlikely Trump will provide Canada with a tariff reprieve, noting tariffs were in place for 14 months before the United States-Mexico-Canada Agreement (USMCA) was signed in May of 2019.
“Firstly, Canada’s hardening stance and tit-for-tat tariffs is creating a challenging negotiating environment. Secondly, Corporate America is unlikely to go to bat for Canada given these tariffs are sector-specific and comparatively far less economically disruptive compared to blanket tariffs,” the report said.
‘Seek concessions’
Merwat said that the “clock is now ticking” for Canada and other U.S. trading partners.
“Over the next three weeks, the Trump administration will seek concessions in the run-up to April 2, the effective date for both reciprocal global tariffs and expiry of Canada and Mexico’s broad-based 25 per cent tariff,” he said.
He said South Korea had previous success by “voluntarily” agreeing to restrict exports based on quotas, while Canada and Mexico held out until USMCA was signed in 2019.
“Future success could only come with meaningful concessions to the U.S.,” the report said.
However, new federal leadership in Canada could be a promising sign, the report notes, saying that both prime minister-designate Mark Carney and Conservative Leader Pierre Poilievre provide an opportunity to reset relations with Trump.
“This could also be a catalyst to engage in USMCA renegotiations, following a similar playbook, and appease an increasingly hawkish (and unpredictable) Trump administration,” the report said.
