Alberta steel and aluminum industry braces for incoming tariffs

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While Canada and the United States flip-flop on a blanket tariff for all exports, Alberta’s steel and aluminum businesses brace for the yet unknowable impact of a special tariff by U.S. President Donald Trump on their industry, set to go into effect on Wednesday.

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“You don’t know why they’re coming. I don’t think there’s any rationale,” said Waiward Industrial president and CEO David Turner. “If you could understand the theory behind it, you might be able to address it. But I don’t, and I don’t think there is one,” he said.

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Putting a pause on blanket tariffs on Thursday for the same ones that went into effect on Tuesday, Trump’s wavering declarations on tariffs on Canadian goods left confusion and uncertainty throughout the country. While a pause may offer reprieve for some products, the steel and aluminum industries still face a 25 per cent tariff that the U.S. administration hasn’t backed down from. Turner said the seemingly ever-changing tariffs spur uncertainty in the industry, making it difficult to make appropriate business decisions.

“There was the initial talk of blanket tariffs, and then they’re postponed. And then there’s steel and aluminum tariffs, and then they’re coming sooner. And then there’s talk of stacking those tariffs. And then there’s the talk of the reciprocal tariffs. And then there’s talk of retaliatory tariffs to reciprocal,” said Turner.

“That is the nature of a trade war. You have no idea where you’re going to end up and how you could plan for that.”

The uncertainty around the tariffs isn’t good for business, he said.

“You don’t really know what environment your business is going to be operating in and what it’s going to have to deal with. So you can’t even start to make the best moves to protect yourself against that situation, because you don’t know what it is,” he said.

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Waiward made the decision in early February to begin adding a clause in its contracts that any price changes resulting from tariffs would be added to the customer’s bill. The risk with the uncertainty, Turner said, is clients refraining from pulling the trigger on projects.

“I don’t see anybody rushing to make decisions. I think if anything it’s going to delay people to try and get some level of certainty before they make a decision,” said Turner.

Beyza Ural Marchand, a professor of economics at the University of Alberta, said that perhaps more than other industries, the steel and aluminum industries in Canada have a “high level of integration” with the U.S.

“We are highly dependent on each other, and tariffs will certainly increase the price levels, I will say, in both countries, but most likely more in Canada than in the United States,” said Ural Marchand.

An RBC Economics report in February showed Canada’s trade balance for steel and aluminum was a combined $14 billion last year.

When the U.S. hit Canada’s steel and aluminum industries with tariffs in 2018/19, the dispute highlighted gaps in the U.S. manufacturing market at the time, which was unable to ramp up its production to meet domestic demand. The U.S. manufacturers turned instead to Canadian and tariffed suppliers from other countries, which actually contributed to a four per cent bump in employment in the steel and aluminum industries in Canada in 2018, according to RBC.

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Still, RBC predicted a rise in prices for steel and aluminum products, particularly for intermediate products in industrial chains, but not enough to destabilize the whole economy. The report also flagged an important element in the Canadian industry’s capacity to respond to the tariffs.

“Canadian investment is in a substantially worse shape now than it was then after being hit by a global pandemic, followed by an underperforming economy over the last two years. Weaker business investment threatens to extend a long run of productivity underperformance, and ultimately, weaker Canadian worker wages compared to other parts of the world,” the report says.

As the federal government navigates the impacts of a blanket 25 per cent tariff, advocates are calling on Ottawa for more support within the industry.

“Donald Trump’s tariffs are a direct attack on Canadian workers and our economy,” said Canadian Labour Congress president Bea Bruske. “Our government must respond with strong, immediate action to defend Canadian industries and the workers who keep them running.” 

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Canadian Steel Producers Association president and CEO Catherine Cobden also asked for government help.

“We are seeking urgent action from all governments in Canada to mitigate the devastating impacts of real market loss in the United States,” said Cobden.

For his part, Turner suggested reducing interprovincial trade barriers as a key area that would better equip the industry to weather the storm.

Ural Marchand also discussed reducing interprovincial trade barriers as a key way to mitigate the full effects of the tariffs, but added making industry more productive and tightening ties with other international trading partners as other options worth exploring.

“There are things we can do. However, we cannot entirely offset the effect of a United States that is more closed to international trade, because the United States is a huge country, and it is our only neighbour, and it will certainly hurt, but we can try to mitigate those effects,” said Ural Marchand.

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