The Impact of U.S. Steel and Aluminum Tariffs on Canada and Mexico

The recent implementation of tariffs on steel and aluminum imports into the U.S. has set off a ripple effect throughout North America, particularly impacting Canada and Mexico. While the goal of these tariffs may be to bolster domestic production in the United States, their consequences extend beyond U.S. borders, affecting trade relationships, industries, and economies in Canada and Mexico.

Canada’s Steel Industry and Its U.S. Connections

Canada’s steel sector is uniquely positioned in the North American market. Notably, all of Canada’s major steel producers are owned by U.S. companies, making the tariffs a complex economic issue with unintended domestic consequences for American stakeholders.

Key Players in Canada’s Steel Industry:

1. Stelco – The second-largest steel producer in Canada, based in Hamilton, Ontario, was acquired by U.S.-based Cleveland-Cliffs for $3.4 billion in July 2024. Prior to this, Stelco was owned by U.S. Steel.
2. ArcelorMittal Dofasco – Canada’s largest steel producer, also located in Hamilton, Ontario, has long been a key player in the North American market, owne by US ArcelorMittal, which is owned by U.S.-based Cleveland-Cliffs.

Vertical Integration Moves – Cleveland-Cliffs made strategic acquisitions purchase of Dofasco and Stelco, integrating its iron ore business with high-quality steel production, particularly for the North American automotive industry.

Ontario’s Steel Sector at the Epicenter

Ontario, which houses 6 of Canada’s 13 steel plants, stands to be the most affected by U.S. tariffs. Given that these steel facilities are all owned by American firms, the tariffs could create unexpected challenges for U.S. companies operating in Canada. The tariffs could raise costs, complicate supply chains, and force companies to reevaluate their strategies for cross-border trade. The City of Hamilton and employees have already begun to feel the affects, with production being cut, as the situation unfolds. ?(CBC News - Canadian businesses already feeling the effects of Trump's steel, aluminum tariff order; Jenna Benchetrit, Feb 10 2025)

Mexico’s Steel Trade with the U.S.

Mexico presents another dimension to this issue. Unlike Canada, Mexico imports more steel from the U.S. than it exports. This means that any tariff-related disruptions could have a significant impact on U.S. steel producers, potentially leading to decreased exports to Mexico and reduced profitability for American firms.

Who Ultimately Pays the Price?

While tariffs are often positioned as protective measures for domestic industries, the reality is that they introduce new costs and inefficiencies across integrated supply chains. The key groups affected include:

• Canadian Steel Producers and Employees – Since all major steel companies in Canada are owned by U.S. firms, these tariffs could hurt their parent companies just as much as they affect Canadian operations.
• Automotive and Manufacturing Industries – Both Canada and the U.S. rely on an interconnected steel supply for vehicle production. Increased costs due to tariffs could drive up prices for auto manufacturers and consumers alike.
• U.S. Steel Producers Exporting to Mexico – Given Mexico’s significant steel imports from the U.S., tariffs could lead to decreased demand and potential retaliatory measures from Mexico.

Conclusion: A Complex Web of Consequences

The imposition of steel and aluminum tariffs by the U.S. introduces a complicated set of challenges that go beyond simple trade protectionism. With Canada’s steel sector predominantly owned by U.S. companies and Mexico heavily reliant on U.S. steel imports, the economic repercussions could be widespread. Rather than solely protecting American steel producers, these tariffs may inadvertently disrupt North American trade relationships, impact U.S.-owned businesses abroad, and create long-term uncertainties in key industrial sectors.

Have a prosperous day.

John Rudnick

Sources:

Canada's Green Steel and Aluminum hopes hit cold, hard trade reality ( The Logic, Murad Hemmadi; Feb 29, 2024)

Why Hamilton's - and Canada's - Steel Industry has lost to lose if U.S. tariffs take effect in March ( CBC's, Samatha Beattie; Feb 04, 2025)