TORONTO — The lifting of U.S. tariffs on imported steel and aluminum from Canada is receiving a positive but guarded welcome from industry, which expressed hope the deal would lead to a speedy consensus on the pending US-Mexico-Canada agreement.
The lifting of the tariffs — to take place within two days of Friday’s announcement — will have a minimal effect on Canada’s overall economy but a sizable impact on a few industries, economists from CIBC Capital Markets wrote.
“The main impact from today’s news will be the improvement in sentiment towards trade with the U.S., something that has been holding back business investment for the past year,” Benjamin Tal and Katherine Judge wrote.
The Trump administration’s imposition of a 25 per cent tariff on steel and a 10 per cent tariff on aluminum from Canada — announced during renegotiations of the North American Free Trade Agreement — has been an ongoing irritant between the two countries.
Among other things, Canada has protested Trump’s imposition of the tariffs for national security reasons — given that the two countries are military allies with highly integrated economies.
“Their removal is good news for workers, producers and communities across the country,” said the national director of the United Steelworkers, Ken Neumann, in a statement.
“But it should have been resolved long ago,” he said, adding Canadian exports never posed a national security threat, contributed to more than 600 layoffs in the steel sector and put investment on hold in the steel and aluminum industries.
The CIBC economists noted that Canadian exporters face new complexity because of the need to track the origins of the steel and aluminum they use — a measure to prevent foreign metal from flowing through Canada to the United States.
The chief executive of the Canadian Manufacturers and Exporters Association acknowledged in an interview that the new deal will cause additional complexity but said it’s an acceptable price to get rid of the U.S. tariffs and Canada’s retaliatory tariffs.
“Because all of those were bad for Canadian businesses (and) bad for U.S. businesses. So we’re very pleased they were able to reach an agreement,” said Denis Darby, CME’s president and CEO.
“While there’ll be some challenges… in the long term it will be a better outcome for Canada and for North America.”
Darby added that the CME is hopeful that removing the tariffs will pave the path “to getting the USMCA signed because, of course, that’s an agreement that many of us worked very long and hard on.”
The Aluminum Association of Canada echoed that hope.
The group’s president Jean Simard said in a statement that the decision enables the full realization of the potential of the new trilateral agreement.
“It’s time to turn the page and redouble our efforts to ensure the full development of the North-American aluminum value chain,” he said, adding Canadian politicians should unanimously support ratifying the agreement before the House adjourns.
The Canadian Vehicle Manufacturers’ Association said it is hopeful the decision will encourage continued progress toward the agreement.
“Resolving this trade issue is very important to the competitiveness of the Canadian automotive manufacturing industry and its suppliers,” said president Mark A. Nantais in a statement.
Shares of Ontario-based Stelco Holdings Inc. got a boost in response to news of the agreement between Ottawa and Washington.
The Canadian steel producer’s shares surged to $17.66 Friday before closing at $17.09, up 11.55 per cent from Thursday’s closing price.
“We have a tremendous amount of praise, really, for this government,” said Alan Kestenbaum, executive chairman of Stelco. “From the beginning, since this happened they put on the retaliatory tariffs, they took a firm position, and they enabled us to thrive in this market.”