New tariffs are shaking up the relationship between Canada’s and the United States’ steel markets. The US has reinstated a 25% Section 232 tariff on Canadian steel imports, which had previously been exempt. This change will significantly affect the Canadian steel industry, especially its largest export market.
Impact of Section 232 Tariffs on Canadian Steel
Since President Donald Trump’s return to office, Canada has faced new tariffs that disrupt trade with the US. Until March 12, 2024, Canada was exempt from these tariffs as part of the USMCA agreement. However, now Canadian steel faces a 25% tariff entering the US, with the possibility of further hikes.
This tariff will reduce Canadian steel demand, leading to a potential contraction of the sector unless steelmakers reduce exports to the US or diversify their markets.
Canada’s Heavy Dependence on the US Market
Canada has been the US’s largest steel exporter for years. In 2024, 95% of Canadian steel exports went to the US. Despite this, Canada also imports around 4 million tonnes of US steel each year. This imbalance, along with the reimposed tariffs, creates challenges for Canadian producers.
Independent mills like Algoma face additional pressure. They rely heavily on US trade and are dealing with ongoing capital projects that add to their burdens.
Canadian and US Steel Prices Decouple
Canadian and US steel prices have traditionally been similar. In October 2024, US hot rolled coil prices were just slightly higher than those in Canada. However, by March, US prices surged by 38%. Initially, Canadian mills absorbed the 25% tariff, but this strategy will not last. With rising domestic production in the US and increased competition from other countries, Canadian steel exports to the US are declining.
In March 2024, US imports of Canadian steel fell to just 414,000 tonnes, the lowest since the early COVID-19 months of 2020.
Seeking Government Support
Canadian steelmakers, particularly smaller independent ones like Algoma, are under pressure. The Canadian Steel Producers Association (CSPA) urges the government to step in. They ask for safeguard measures to protect local mills from cheap imports. They also want “Buy Canadian” mandates for public infrastructure projects to boost demand for domestic steel.
Without more government intervention, Canada’s steel industry could shrink further. Global overcapacity and ongoing tariff disputes leave the industry in a vulnerable position.
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