Canada Moves Toward Potential Safeguard Tariffs on Steel Imports

(Bloomberg) -- Justin Trudeau’s government is taking a key step toward imposing potential new tariffs and quotas on certain steel imports, with his finance chief saying a surge in foreign steel may be disrupting the market.

Finance Minister Bill Morneau announced a 15-day consultation on potential safeguard measures on seven types of steel imports. The provisional measures would be applied if the consultation shows producers are being harmed, Morneau said Tuesday, signaling there’s already evidence that’s happening.

“We have seen increases in imports; that’s an important reason why we have come forward today,” Morneau said during a news conference at Hamilton, Ontario-based ArcelorMittal Dofasco. Second-quarter trade data from Statistics Canada show a spike in shipments from countries like Brazil, India, Turkey and Germany. “That surge in imports leads us to be concerned that we need to consider what measures to take.”

The seven product categories include inputs for the auto sector and rebar used in residential construction. The government said in June it had three categories in mind, prompting companies to call for a more extensive list to be included. Canada will now consider whether additional products beyond the seven should be added.

Canada Moves Toward Potential Safeguard Tariffs on Steel Imports

The moves would be part of the widening impact from President Donald Trump’s trade battles, which resulted in U.S. tariffs of 25 percent on steel and 10 percent on aluminum that were imposed on Canada, the European Union and other nations in June.

The seven classes of imports subject to potential provisional measures announced Tuesday are:

  • Steel plate, used in heavy machinery and transportation manufacturing
  • Rebar, used heavily in construction
  • Energy tubular products, used in oil and gas exploration, extraction and transmission
  • Hot-rolled sheet, used in construction and the auto sector, among others
  • Pre-painted steel, used in construction, industrial packaging and appliance manufacturing
  • Stainless steel wire, used in manufacturing of pins, nails, springs, filters and conveyor belts
  • Wire rod, used in manufacturing of automotive and industrial components, wires, springs, fasteners and nails

Bloomberg reported in June the Canadian government was preparing new measures including a combination of quotas and tariffs targeting certain countries including China to prevent them from diverting steel shipments into Canada.

“We know that because of the unfair tariffs imposed by the United States, other countries will be seeking alternative markets for their steel products,” Morneau said. “Canada is now at risk for a surge in imports of steel products, which could harm Canadian steel producers and workers. From our perspective this is just unacceptable.”

The EU has imposed its own provisional safeguards to ward off steel that might otherwise have been sent to the U.S. Canada produced 13.7 million tonnes of iron and steel products last year, less than one percent of total global production.

‘Serious Consequences’

The head of a major Canadian steel group said measures by other countries should force Canada’s hand to protect its sector.

“All of the producer community would agree that ideally we’d like to return to a situation where there’s fair trade in steel,” Joseph Galimberti, president of the Canadian Steel Producers Association, said in an interview ahead of the announcement. “The government has to take similar steps to protect Canadian producers or face pretty serious consequences as a result of global diversion.”

Some steel importers and fabricators have been pushing back on any potential safeguards, arguing they will negatively impact the Canadian economy and raise costs in sectors including housing or infrastructure.

The safeguard could be a tariff that applies only to imports that exceed a certain target volume, similar to a format used by the EU, according to a notice from Canada’s finance department.

©2018 Bloomberg L.P.