Canada's Aluminum Sector Braces for Long Rough Patch

SEATTLE (Scrap Monster): As the Donald Trump administration continues to threaten a barrage of new tariffs, some industry leaders in Canada are ready to assume the worst-case scenario about the ultimate objective: destabilizing the Canadian economy.

Currently, Trump is threatening to enact 25 per cent tariffs on Canadian aluminum on Wednesday and an additional 10 per cent tariff in April, but the situation has been shifting on an almost daily basis. Tariffs have been paused for 30 days more than once or otherwise adjusted and rumours have typically preceded official announcements.

Jean Simard, chief executive of the Aluminum Association of Canada, said he long ago stopped believing tariffs were related to border issues such as illegal drugs and migrant crossing, or that tariffs were a means to bring Mexico and Canada back to the negotiating table on a new free trade agreement.

Instead, he said the economic objective is far more simple and basic: to create uncertainty that will deter investment in Canada.

“That’s my take on it,” he said on Monday. “That’s the overarching objective: nurturing uncertainty to make the U.S. the only safe harbour for investments. It’s awful.”

Simard said there could be persistent “reprieves” for tariffs for years, essentially upending Canada’s duty-free access to the U.S. that has defined economic growth for decades.

So far, few Canadian goods have actually faced tariffs, and the tariffs that have come into effect from the U.S. on many goods have been quickly lifted or delayed. But the delays and threats have added an uncertainty that everyone from new Liberal leader Mark Carney to Conservative Leader Pierre Poilievre to Bank of Canada governor Tiff Macklem has said will dissuade investment here.

For example, aluminum was expected to face a 25 per cent tariff under the universal tariffs that Trump originally said would be enacted in early February. Those tariffs were delayed by 30 days until March 4, enacted and then lifted within hours, but delayed again until April 2.

The original order on tariffs also included a carve-out that reduced the tariffs on energy-related products, including critical minerals such as aluminum, to 10 per cent, but there is the looming possibility of a 25 per cent tariff taking force on Wednesday.

Trump is also threatening reciprocal tariffs in April on all products exported to the U.S., which would match value-added taxes, general sales tax and any other tax or tariff imposed by another country on U.S. exports.

Simard said many assume the tariffs are designed to bring back manufacturing jobs to the U.S., but that’s not a rational outcome in many cases.

For example, he said the U.S. produces around 700,000 tonnes of aluminum every year, but imports about 4.3 million tonnes. Producing aluminum is highly dependent on electricity. By his group’s analysis, U.S. aluminum production consumes as much electricity as the entire Hoover Dam produces in a single year — about 10,000 megawatt hours.

 Courtesy: www.financialpost.com