Canada's Biggest Steelmaker Sees Layoffs From U.S. Tariffs

(Bloomberg) -- The head of Canada’s biggest steelmaker says he may have to lay off 1,000 workers and review C$750 million ($564 million) of investment if the government doesn’t fight back against U.S. tariffs.

Canada shouldn’t waver in its plan to retaliate against the 25 percent tariff the U.S. has imposed on steel imports, ArcelorMittal Dofasco Chief Executive Officer Sean Donnelly told lawmakers Tuesday in Ottawa. The government should also seek the permanent elimination of the U.S. tariff, he said.

“This combined impact could result in reduced production, potential shutdown of operating lines impacting over 1,000 direct jobs and over 4,000 indirect jobs in Ontario, in Quebec, with significant implications” to future investment, he said. The Hamilton, Ontario-based unit of Luxembourg-based ArcelorMittal has a payroll of more than 8,000 in Canada and ships 6 million metric tons of steel a year, he said.

Canada is set to impose retaliatory tariffs on C$16.6 billion of U.S. products. The start date comes after a one-month delay during which Prime Minister Justin Trudeau waited to see if the U.S. would back down on its tariffs. The U.S. levies of 10 percent on aluminum and 25 percent on steel, based on national security grounds, also apply to Mexico and the European Union.

Response ‘Critical’

“In order to continue with our investments, our shareholders require us to demonstrate adequate returns, and obviously this is difficult,” Donnelly said. The company is in the middle of a plan to spend C$1.7 billion on capital and maintenance between 2016 and this year, he said.

Without naming specific countries, Donnelly said in his opening remarks that there was already a rise in product being diverted to Canada in recent years and signs of even more since the U.S. tariffs began this year. “Canada’s response to past and future threats from unfairly traded and diverted offshore imports is critical,” he said.

So far the cost of the U.S. tariffs are being split between Canadian producers and U.S. customers, depending on the specific product, he said. The cost to Dofasco of both trade issues has already been “in the many millions of dollars.”

Ken Neumann, national director for the Canadian unit of the United Steelworkers union, said Trudeau’s government must move ahead with support for the industry and its workers. The U.S. tariffs are an “absurdity” given that nations such as China are responsible for a global glut and “predatory” practices such as low wages and currency restrictions, he said.

Donnelly said the Canadian response shouldn’t be to escalate the trade fight. The goal must be “reciprocal and proportionate,” he said, adding the duties should be a method to force the U.S. to give up the tariffs on Canada.

To contact the reporter on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier, Steven Frank

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