Guns and butter
Trump is increasing steel and aluminum tariffs to 50%, muses about high dairy tariffs
Canadians are growing weary of Donald Trump’s daily and ever-changing trade torpedos. Aluminum and steel tariffs of 25% were set to take effect on March 12. On March 11th, in a mostly incoherent tweet (edit: it was actually a truth social post), Trump declared that he would increase the steel and aluminum tariffs to 50% in response to Ontario’s 25% export tariff on electricity. Doug Ford responded that he was “considering” increasing the electricity export tariff to 50% in response. (Update: Doug Ford backed off the 25% export tariff on electricity, and aluminum and steel tariffs went back to 25%.)
What do steel and aluminum tariffs mean?
Canada imports about as much steel from the US as we export to them. This reflects specialization - Canadian steel manufacturers specialize in slightly different products than US ones, and we buy what we don’t produce from each other. Last year the US imported about $13 billion USD worth of steel and iron, and Canada imported about $11 billion USD in return.
Steel production is dispersed throughout Canada, with most of the jobs located in southern Ontario, but some smaller centres would face a big hit to their local economies if plants shut down in response.
Aluminum is a different story. Last year the United States imported about $11 billion USD from Canada, but only sold us about $3 billion USD in return. Close to half of their aluminum imports come from Canada. Over 90% of our exports go to the US.
Canada has three aluminum producers that operate 9 smelters. Aluminum processing is concentrated in Quebec - with 8 smelters in the province. Kitimat, BC has Canada’s only other aluminum smelter. According to the Aluminum Association of Canada, there are 9,500 direct jobs in aluminum smelting, but the industry is linked to an estimated 20,000 indirect manufacturing jobs on top of that.
When similar tariffs were introduced in Trump’s first term, the federal government actively supported the two industries for the full year that the tariffs were in effect.
Does Canada have a 250% tariff on US Dairy?
Sort of, but not really. In the Canada-US-Mexico trade agreement that Donald Trump negotiated during his first term, Canada has set a limit on the amount of tariff-free dairy imports from the United States. If US producers wanted to sell more than this amount into Canada, they would face a very high tariff.
BUT, US producers don’t come close to exporting enough dairy products into Canada to ever face that tariff. For example, under CUSMA, US dairy producers can sell 41,667,000 kg of milk into Canada tariff free. Last year they sold less than 14,000,000 kg.
This arrangement is standard in Canada’s international trade agreements, and it’s something that we negotiate in order to protect our current system of supply management.
Circuses and nonsense
It’s one thing to negotiate limits and tariffs as part of a broad trade agreement, and it’s a completely different thing to arbitrarily announce a wide array of tariffs where the details change almost daily, outside of a negotiated agreement. Trump’s approach is creating widespread economic uncertainty in Canada and the US, and there will be long term consequences for both of our economies.