Industry, economists weigh in on lifting of tariffs on Canadian steel, aluminum

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Rolls of coiled coated steel are shown at Stelco before a visit by the Chrystia Freeland, Minister of Foreign Affairs, in Hamilton on June 29, 2018. The lifting of American tariffs on imported steel and aluminum from Canada is receiving a guarded welcome. Economists say there will be only a minimal impact on the overall Canadian economy but will have a sizable impact on a few industries, such as the automotive sector. THE CANADIAN PRESS/Peter Power

TORONTO — The lifting of U.S. tariffs on imported steel and aluminum from Canada is receiving a positive but guarded welcome from industry.

The lifting of the tariffs — to take place within two days of Friday’s announcement — will have a minimal effect on Canada’s overall economy but a sizable impact on a few industries, economists from CIBC Capital Markets wrote.

“The main impact from today’s news will be the improvement in sentiment towards trade with the U.S., something that has been holding back business investment for the past year,” Benjamin Tal and Katherine Judge wrote.

The Trump administration’s imposition of a 25 per cent tariff on steel and a 10 per cent tariff on aluminum from Canada — announced during renegotiations of the North American Free Trade Agreement — has been an ongoing irritant between the two countries.

Among other things, Canada has protested Trump’s imposition of the tariffs for national security reasons — given that the two countries are military allies with highly integrated economies.

The economists noted that Canadian exporters face new complexity because of the need to track the origins of the steel and aluminum they use — a measure to prevent foreign metal from flowing through Canada to the United States.

The chief executive of the Canadian Manufacturers and Exporters Association acknowledged in an interview that the new deal will cause additional complexity but said it’s an acceptable price to get rid of the U.S. tariffs and Canada’s retaliatory tariffs.

“Because all of those were bad for Canadian businesses (and) bad for U.S. businesses. So we’re very pleased they were able to reach an agreement,” said Denis Darby, CME’s president and CEO.

“While there’ll be some challenges. . .  in the long term it will be a better outcome for Canada and for North America.”

Darby added that the CME is hopeful that removing the tariffs will pave the path “to getting the USMCA signed because, of course, that’s an agreement that many of us worked very long and hard on.”

Shares of Ontario-based Stelco Holdings Inc. got a boost in response to news of the agreement between Ottawa and Washington.

The Canadian steel producer’s shares surged to $17.66 Friday before moving lower to $16.99 later in the afternoon, up 10.9 per cent from Thursday’s closing price.

 

Companies in this story: (TSX:STLC)

The Canadian Press

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