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An End In Sight For Tariffs On Canadian Steel And Aluminum

An End In Sight For Tariffs On Canadian Steel And Aluminum

An end could be in sight for costly U.S. tariffs on Canadian steel and aluminum, according to recent comments from officials of both countries.

David MacNaughton, Canada's Ambassador to the United States, suggested last week that the 25 percent levy on steel and 10 percent on aluminum exports could lift "within weeks." Meanwhile White House economic advisor Larry Kudlow said he was working on ending the tariffs, which went into effect in 2018.

News of a possible end to the tariffs came as Canadian officials suggested that Canada wouldn't adopt NAFTA's successor, USMCA, without the levies on steel and aluminum dropped.

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Richard O'Neil, a Seattle-based attorney with Neville Peterson, a law firm specializing in international trade and supply chain issues, recommending viewing the tariff developments cautiously.   

"You're looking at tea leaves and trying to read them when there's an 800-pound gorilla on the ground [President Trump]," O'Neil said.

On Tuesday, the U.S. Commerce Department announced investigations into the alleged dumping of Canadian, Chinese and Mexican steel onto the American market – a reminder that the Trump Administration's trade posture remains intact.

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Apart from cost, the tariffs have added a layer of confusion to companies dealing with cross-border supply chains.

"It becomes extremely disruptive in the modern supply chain," said John Peterson, a partner with Neville Peterson. "Take a U.S. manufactured-piece of steel to Canada, and then back. How are you applying tariffs on these?"

Peterson said he expected companies may attempt to recoup some of their costs if the tariffs are lifted.

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In Windsor, Ontario, which sits on the Canadian side of Detroit's eponymous river, there are hopes and end to the steel and aluminum tariffs would return some normalcy to an economy dominated by the auto sector.

"Companies have been trying to wait it out and absorb the costs," said Stephen MacKenzie, CEO of WindsorEssex Economic Development Corporation.

But MacKenzie warned that the costs can't be absorbed indefinitely, and noted that the tariffs impact both sides of the border.

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He pointed to the Chrysler Pacifica minivan, which is assembled at a Fiat Chrysler Automobiles (NYSE: FCAU) plant in Windsor.

"There are parts in the Pacifica's drivetrain that cross the border seven times before they're finally installed," he said.

If the steel and aluminum tariffs get lifted, the Trump Administration is still considering imposing a 25 percent tariff on imported cars and parts.

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