Canadian steel producers await U.S. review
Although China is primary target, Trump could slap tariffs, impose restrictions
Despite an unpredictable Trump administration, there is cautious optimism the U.S. will spare Canadian steel producers when a rare investigation of “national security” effects of steel imports wraps up later this month.
Still, there are fears Commerce Secretary Wilbur Ross could slap the whole world with tariffs or other restrictions on steel imports in the interest of President Donald Trump’s “Buy American” aspirations, even though China, which over-produces steel and “dumps” it into other markets at low prices, is the primary target.
It is a potential spat that looms over Canadian industry well ahead of North American Free Trade Agreement negotiations, which are not expected until August at the earliest.
Initiated in April under Section 232 of the U.S. Trade Expansion Act, the investigation triggers broad authorities for Trump to “adjust imports,” including with tariffs, if they can be tied in some way to national security. A similar investigation is being undertaken on aluminum imports. The section hadn’t been invoked since 2001.
Ross said at a hearing last month the department will recommend “responsible action” to Trump if any “threat” to national security is found. A question being asked, he said, is: “if the president does decide to take action, should it cover all steel from everywhere?” It is expected Ross will report to Trump by the end of June.
“Our steel and aluminum industries support good middle class jobs, are highly integrated, and our trade is highly balanced. As a key ally and NORAD partner, we are concerned that Canada was included,” said Alex Lawrence, a spokesman for Foreign Minister Chrystia Freeland.
“The minister has personally told U.S. Secretaries and senators we think it is unwise to look at Canada through a national security lens. We are hopeful this issue can be resolved.”
In a May 31 submission to the U.S. commerce department obtained by the National Post, the Canadian government argued “steel imports from Canada do not threaten to impair U.S. national security,” and any “disruption in established free and open supply chains” would be harmful to manufacturers in both countries.
In 2016, according to American data, Canadian exports to the U.S. (about six per cent of the American market) amounted to US$4.05 billion and U.S. exports to Canada (about 33 per cent of the Canadian market) were worth $4.59 billion. The U.S. has about a $2-billion surplus in the broader supply chain.
Liberal MP Bob Bratina, co-chair of parliament’s all-party steel caucus, said he has heard from American counterparts that “our enemies are to the east, west and south of us, not to the north of us.”
Bratina said, “you have to be concerned, but there are a lot of things in our favour.”
Canada and the U.S. work together in “market defence against that Chinese product,” said Joseph Galimberti, president of the Canadian Steel Producers Association.
“The more we co-operate, the more competitive we become, the more we collectively succeed.”
He added United Steelworkers, a union with members in both countries, has also come to Canada’s defence.
Until March, Ross was on the board of ArcelorMittal, a major steel producer that operates in Canada (and 59 other countries). “He would know,” Bratina said, how closely Canada and the U.S. co-operate in the steel market.
But Toronto trade lawyer Lawrence Herman warned Ross may lump other countries into a threat from China.
“It would have a monumental impact on Canadian industry,” he said. “If Ross recommends surcharges or quotas on imports of steel or aluminum or other strategic products, there will be a hell of a global response.”
The case for Canada is good, Herman said, and the Canadian government has done “a superb job” conveying its message to Americans. But Trump is “volatile.”
Canada and the U.S. have been fighting on dairy; on aerospace, with the commerce department investigating Bombardier airplanes; and on softwood lumber, with the U.S. laying down a major tariff, then Canada offering a $867-million relief package to producers Thursday. The U.S. came back Friday, accusing the Canadian government of subsidizing the industry.
The steel industry is also concerned about wider “Buy American” initiatives the U.S. government is reviewing, in addition to the prospect of an order from Trump to require American steel be exclusively used for U.S. construction of TransCanada’s proposed Keystone XL pipeline, which would run from Alberta to Nebraska.
It’s “all hands on deck right now,” said steel caucus co-chair Terry Sheehan, the Liberal MP for Sault Ste. Marie, adding Trudeau has raised the specific issue with Trump and the caucus will travel to Washington June 28. “We’re unsure of what could happen in the future so we’re being as proactive as possible. We’re not going to sit back and wait.”
Should worse come to worse, Sheehan said he expects the government “will make sure that the steel industry is protected however they need to protect it.”