CAUGHT IN THE MIDDLE
Brett Froats, one of the co-owners of Colonial Tool Group Inc., said his Windsor company is already being hit hard by the trade war between Canada and the U.S. The Canadian government on July 1 slapped high new tariffs on American steel his business needs for its operations.
Colonial Tool is caught like a speck of sand in the multibillion-dollar Canada-U.S. tariff dust-up, stuck paying 25 per cent more for U.S. steel.
“I’m caught in the middle because the big guys are fighting,” Brett Froats, one of three owners at Colonial Tool said of the “ridiculous” and escalating trade dispute between U.S. President Donald Trump and Prime Minister Justin Trudeau.
“It’s like a bunch of kids playing in the sandbox.”
Colonial Tool Group Inc. is paying 25 per cent more for steel it buys from the United States because of the steel tariffs imposed July 1 by Canada in retaliation for U.S. tariffs that went into effect in June. Froats said he’s paid an extra $7,000 for steel just in the first six days of the new tariff on imported steel.
Colonial Tool, with $16 million in sales a year, is stuck because it has to buy high-speed steel, which is a stronger, harder steel needed to manufacture cutting tools for auto parts manufacturers. That steel is not manufactured in Canada, so Canada should not have included it in the broad steel tariffs and should exempt it quickly, Froats said. “There’s no way out. We have to pay the tariff right now,” he said. “The prime minister and the president, they ’re just throwing sand at each other and it just keeps piling up, piling up. I don’t know what the end is.”
Many mould, tool and die manufacturers are scrambling to figure out where to buy steel they can’t get from Canadian producers and how their current and future contracts are affected, said Jonathon Azzopardi, chairman of the Canadian Association of Moldmakers. At stake in the Windsor area is the health of about 250 companies — with 6,000 employees — that buy steel and process it, he said. The July 1 retaliatory tariff was the worst thing Canada could have done, and the mould industry is collateral damage, Azzopardi said. “Not only do we have (U.S.) protectionism, but we are now no longer as competitive. It was like we got hit by a double whammy with them putting that 25 per cent tariff on.”
Azzopardi, who is also the president of Laval Tool and Mould Ltd. and the vice-chairman of the Auto Parts Manufacturers’ Association, said the companies need exemptions and a quick resolution to NAFTA negotiations. Ideally, he added, both countries should drop their tariffs and get back to the negotiating table this month. One possible avenue to a solution was created last year when the federal government made Windsor-Essex a foreign trade zone that is eligible for tariff and tax exemptions.
“We can’t explore that fast enough,” Azzopardi said. Some are finding it’s cheaper to pay the 25 per cent tariff and the exchange rate than to pay the higher prices for steel from Canadian suppliers selling U.S. steel at an inflated rate. Even if they can find a European supplier, there could be a 30-week wait. And on top of the tariffs, steel prices have jumped. “It’s getting a little bit like the wild, Wild West,” Azzopardi said. “I think I described that a while ago that this is exactly what would happen if we went down this road. While the rules are trying to be written, everybody’s doing whatever they want.”
Canada retaliated against U.S. tariffs on steel and aluminum with a 25 per cent tariff on U.S. steel and a 10 per cent surtax on aluminum and on other U.S. products representing $16.6 billion of imports, which equals the value of 2017 Canadian exports affected by U.S. tariffs.
With the tariffs, the federal government announced $2 billion in financial aid for affected steel, aluminum and manufacturing sectors. MP Cheryl Hardcastle (NDP—Windsor-Tecumseh) said businesses should phone their MP’s office for help with accessing that fund. Hardcastle said the NDP supported the retaliatory tariffs and has been pushing for a strong plan to support the companies and the workers.
“The government has been trying to be responsive very quickly, so hopefully we’re in a situation where it’s all hands on deck. We can all work together to mitigate this.” The federal Department of Finance said via email Friday it is “in the process of developing a framework for considering requests for remission of surtaxes in exceptional circumstances.” Although more questions were asked by the Star, the department did not respond to those Friday afternoon.
Colonial Tool, which employs 65 people, is passing on some of the extra costs, but Froats is afraid he’ll lose customers.
“It just keeps escalating,” Froats said. “Where does it stop? Eventually, it will reach some kind of equilibrium I’m assuming, but when it reaches that equilibrium we’ve just increased the price of everything. Cars, houses, whatever.”