Trump’s Potential Tariffs on Steel and Aluminum Imports: A Closer Look at North American Trade Tensions

Trade Policy Shift: Canada and Mexico Under Scrutiny
President-elect Donald Trump is preparing to take aggressive action on steel and aluminum imports, potentially imposing tariffs as high as 25% on metals imported from Canada and Mexico. This is a significant shift, as both countries are the U.S.’s top steel and aluminum suppliers. Canada, which exported 5.9 million metric tons of steel to the U.S. in 2024, is the largest steel exporter to the U.S. Mexico follows as the third-largest supplier with 3.2 million metric tons. Trump’s proposal stems from his concerns about national security, illegal immigration, and potential circumvention of existing U.S. tariffs, particularly regarding Chinese steel transshipped through Mexico.

USMCA: A Key Trade Agreement in Limbo
Under the current USMCA (U.S.-Mexico-Canada Agreement), steel and aluminum from Canada and Mexico enter the U.S. duty-free, a significant benefit for these countries. However, Trump’s administration may challenge this agreement. The U.S. Steel Manufacturers Association (SMA) has lobbied for stronger measures, including re-imposing tariffs on Mexican steel and introducing stricter rules of origin for North American steel. The SMA has also called for eliminating tariff-rate quotas that President Joe Biden negotiated with the European Union, Britain, and Japan in 2023 to exempt them from Section 232 tariffs on steel. Trump’s position is influenced by a desire to reduce steel imports from Mexico, which he claims allows Chinese steel to slip through the trade system without tariffs, a concern that has persisted since the previous administration.

Mexico’s Steel Imports: A Growing Political Issue
Mexico’s steel exports to the U.S. have sparked political tension in Washington. A bipartisan group of U.S. senators, including incoming Secretary of State Marco Rubio, have accused Mexico of violating agreements to keep steel exports at historical levels. Mexican steel conduit imports to the U.S. have surged by up to 500% compared to the baseline period of 2015-2017. In response, the Biden administration re-imposed a 25% tariff on steel melted or poured outside of North America in 2023. However, critics argue that this step was insufficient, as it only applied to a small portion (13%) of total steel imports from Mexico, leaving the broader issue unresolved.

Canada’s Approach to Chinese Transshipment
While Canadian steel exports have not sparked the same level of controversy, concerns about Chinese steel transshipment have grown. In October 2023, Canada imposed a 25% surtax on specific Chinese steel and aluminum products, including iron and non-alloy steel. This was an effort to prevent Chinese steel from entering North American markets under the guise of Canadian origin, but the possibility of Trump targeting Canadian steel remains unlikely due to existing diplomatic relationships and Canada’s proactive measures against Chinese transshipment.

Implications for North American Trade Relations
If Trump proceeds with tariffs on steel and aluminum imports from Canada and Mexico, it could strain the North American trade relations established under the USMCA. Such moves would likely create significant disruptions in industries reliant on these imports, particularly in construction, manufacturing, and automotive sectors, which depend on affordable steel and aluminum supplies. While Trump’s authority to impose these tariffs is supported by national security concerns and trade provisions in the USMCA, the broader economic and diplomatic impacts could lead to contentious trade disputes.