Trump’s steel and aluminum tariffs are now in effect, escalating the U.S.-Canada trade conflict

U.S. President Donald Trump’s heightened tariffs on steel and aluminum imports came into effect on Wednesday, following the expiration of previous exemptions, duty-free quotas, and product exclusions. This move marks a significant escalation in his efforts to reshape global trade practices to benefit the United States.

The implementation of these tariffs reinstates a 25% global tariff on all steel and aluminum imports and expands the duties to include numerous downstream products derived from these metals, such as nuts, bolts, bulldozer blades, and soda cans.

Leading up to the tariff deadline, tensions escalated on Tuesday when Trump threatened to increase the duty on Canadian steel and aluminum exports to the U.S. to 50%. However, he later retracted this threat after Ontario Premier Doug Ford agreed to delay a 25% surcharge on electricity exports to Minnesota, Michigan, and New York until the earlier U.S. tariffs were lifted.

Ford announced plans to travel to Washington on Thursday with Canadian Finance Minister Dominic LeBlanc to engage in discussions with Commerce Secretary Howard Lutnick and other officials regarding potential revisions to the U.S.-Mexico-Canada Agreement on trade.

This situation caused fluctuations in U.S. financial markets, which were already on edge due to Trump’s extensive tariff initiatives, but did not alter his original strategy to reinforce the Section 232 national security tariffs on steel and aluminum that were established during his first term in 2018.

A White House spokesperson characterized the U.S. pressure on Canada as a “win” for American citizens. The U.S. Customs and Border Protection agency had previously informed shippers that imports eligible for duty-free entry under quota arrangements needed to have their paperwork processed by 4:30 p.m. local time on Tuesday, or they would incur the full tariffs.

The decision was positively received by U.S. steel manufacturers, as it reinstates Trump’s original 2018 metals tariffs, which had been diluted by various country-specific exemptions and quotas, along with numerous product-specific exclusions.

“By eliminating loopholes in the tariff that have been taken advantage of for years, President Trump will once again invigorate a steel industry poised to help rebuild America,” stated Philip Bell, President of the Steel Manufacturers Association.

“The updated tariff will guarantee that American steel producers can continue to generate new, well-paying jobs and make significant investments, confident that they will not be undermined by unfair trade practices,” Bell further remarked.

The countries that will be most impacted by these tariffs include Canada, the largest foreign supplier of steel and aluminum to the U.S., as well as Brazil, Mexico, and South Korea, all of which have previously benefited from certain exemptions or quotas.

The intensification of the U.S.-Canada trade conflict coincided with Prime Minister Justin Trudeau’s transition of power to his successor, Mark Carney, who recently won the leadership of the ruling Liberal Party.

On Monday, Carney indicated that he would not be able to engage with Trump until he officially assumes the role of prime minister. Trump reiterated on social media his desire for Canada to become the “cherished Fifty First State.”

Canadian Energy Minister Jonathan Wilkinson informed Reuters that Canada might consider implementing non-tariff measures, such as limiting oil exports to the U.S. or imposing export duties on minerals, should the U.S. tariffs continue.

Canada currently exports approximately 4 million barrels of crude oil to the U.S. daily via pipeline, primarily to Midwest refineries. Wilkinson also mentioned that imposing tariffs on American ethanol is another potential option.

While most trade between the U.S. and Canada remains tariff-free under the USMCA trade agreement signed by Trump in 2020, he continues to express dissatisfaction with Canada’s elevated tariff rates on dairy products. Recently, Ottawa secured a one-month extension for USMCA-compliant exports from Trump’s general 25% tariffs, which were threatened due to fentanyl trafficking concerns.

In early April, Canada is confronted with reciprocal tariffs imposed by Trump, which aim to elevate U.S. tariffs to align with those of other nations and address non-tariff barriers. With its abundant hydropower resources, Canada has established a strong foothold in the U.S. aluminum market, as its primary aluminum production is more cost-effective than that of the U.S. This is notable even as U.S. smelters, which had seen a revival due to Trump’s tariffs, are now inactive.

China continues to be the second-largest supplier of aluminum and aluminum products, but it is already subject to significant tariffs intended to combat alleged dumping and subsidies, in addition to a new 20% tariff recently imposed by Trump in response to fentanyl trafficking concerns.

Since taking office in January, Trump’s intense focus on tariffs has unsettled investor, consumer, and business confidence, raising concerns among economists about a potential recession. A small business survey released on Tuesday indicated a decline in sentiment for the third consecutive month, completely reversing the confidence boost that followed Trump’s election victory on November 5. Additionally, a survey conducted by the New York Federal Reserve on Monday revealed that consumers are becoming increasingly pessimistic regarding their financial situations, inflation, and the job market.