Steel and aluminum CEOs warn of 'existential threat' if Canada doesn't impose tariffs on China

Canada's steel and aluminum industries are warning they face an "existential threat" if the Trudeau government fails to move in lockstep with the U.S. and Mexico by introducing tariffs on Chinese steel and aluminum imports this month.

"We can't be the only CUSMA country that is not taking this serious action for many reasons, but not the least of which is that we'll become the dumping ground for this excess steel capacity without those checks and balances at the border," said Catherine Cobden, president and CEO of the Canadian Steel Producers Association, referring to the Canada-United States-Mexico trade agreement.

"Frankly, in our view, doing nothing is not an option."

Those two industries are asking the federal government to impose a tariff of at least 25 per cent on all melted and poured Chinese steel products and most aluminum products entering Canada. 

That would match the new tariffs announced by the U.S. on 289 different Chinese steel and aluminum imports. 

"What I'm nervous about is the urgency," Cobden said. "We can't emphasize enough how critical a moment in time this is to stand in lockstep with our biggest trading partner, the United States, and frankly Mexico as our CUSMA partner.

"Failure to act risks good jobs in steel and aluminum communities right across this country. It would relate to losses in economic growth and investment in Canada."

'A hole in the CUSMA fortress'

In May, the U.S. announced it was imposing 387 tariffs on Chinese products, including steel and aluminum, at up to 24 per cent.

"Our metal is like water, seeking the path of least resistance to reap the highest price," said Jean Simard, president of the Aluminium Association of Canada. "The fencing-out of Chinese excess capacity by Mexico and the U.S. leaves us, Canada, the sole tariff-free point of entry in the CUSMA trading space."

According to the Canadian Steel Producers Association (CSPA), more than 760,000 tonnes of melted and poured Chinese steel entered the American market in 2023, while over 750,000 tonnes entered the U.S. the year before. 

Those volumes are 20 per cent higher than the current amount of Chinese steel that enters Canada every year. 

"This is a clear and present danger," Simard said. "We cannot and will not let this happen. It's not in our industry's interest and not in Canada's interest."

Simard and Cobden said any Chinese steel diverted from the U.S. market by tariffs could end up here.

"In an ideal world, [the government] would work in lockstep with the U.S. government's implementation so that we don't open a hole in the CUSMA fortress that will enable Chinese imports to come in," Simard said.

Simard also pointed to the environmental impacts of Chinese steel and aluminum.

"Canada's aluminum industry competes amongst the best and against the best," he said. "It is the lowest carbon footprint aluminum produced in the world with high-paying jobs.

"China's … metal is seven times more carbon intensive than Canada's. So when we allow imported Chinese metal to come into Canada, we are importing with it carbon at no cost, and exporting jobs at a high price, and undermining our hard earned technology investments."

'Devastating impact'

In May, the deputy prime minister's office said Canada would not become a "dumping ground" for Chinese steel and aluminum and the government was not ruling out any options.

But no new measures have come into place since.

Deputy Prime Minister Chrystia Freeland's office pointed CBC to a just-wrapped consultation process that looked at tariffs on Chinese electric vehicles, but not on steel and aluminum.

"All options are on the table to ensure Canadian workers and EV supply chains are protected from unfair competition from China's intentional, state-directed policy of overcapacity and lack of rigorous labour and environmental standards," said Katherine Cuplinskas, a spokesperson for Freeland's office.

"There was a consultation process that just ended on electric vehicles and the whole value chain, including aluminum and steel," Simard said. "They got interventions from probably in excess of 200 representative groups. We are waiting for the government to come out with the right signals from this consultation."

The CSPA says that consultation shows the government recognizes the "devastating" impact China's excess industrial capacity has had on employment and competitiveness in Canada.

"I think we want to make sure they get to the start line and not wait to get to the finish line, because it will be too late," Simard said. "They have to be there at the same time as their partners."

Urgent action can't come fast enough, the industry leaders said.

"We have seen a doubling of Chinese steel in our market over the last several years," Cobden said. "That's a proof point that the trade remedy system alone is insufficient to deal with the moment of what we're facing in terms of Chinese overcapacity."

The Department of Finance's website says that Canada's trade remedy system "provides recourse for Canadian producers that are injured by unfairly traded goods entering the Canadian market." But Cobden said 56 per cent of all trade claims currently being pursued through that system are already partially or wholly against China.

Cobden said the system is cumbersome and can take over a year to reach a conclusion.

"The problem will continue to be the erosion of the Canadian steel industry and our jobs, and we've seen systematic decline in how much steel we're able to sell in our own country," she said.