US and Canada talk trade, market contemplates fate of S232 steel protections

“We agreed to pursue negotiations toward a deal within the coming 30 days,” Carney said in a post on X on Monday. 

The same day, during the 51^st gathering of the G-7 nations (Canada, France, Germany, Italy, Japan, US and the United Kingdom) in Alberta, Canada, US President Donald Trump stated that a trade deal with Canada was “achievable.”  

Earlier this month, the President doubled Section 232 tariffs for all countries except the UK, causing more trade friction by raising Canada’s steel and aluminum tariffs to 50%. 

Canada’s Ambassador to the US Kirsten Hillman and Trade Minister Dominic LeBlanc reported that discussions between the countries are progressing.  

“The tariffs that the administration has put on Canada, tariffs that run counter to the CUSMA tariffs, and counter to the agreement we have with the United States. That is our goal. Our goal is to get the tariffs off, to get to a place of stability, and to then talk to the President about if there’s a transformation in the way in which we trade,” said Hillman. 

Market contemplates future trade relations

Market sources indicate that if “The Great White North” successfully prevents cheap, market-distorting steel from entering its borders and reaching the US, the US will likely negotiate Section 232 protections. Both Canadian steelmakers and the US steel industry have spoken out against the market-distorting influx of cheap foreign steel entering the Canadian and US markets.

Earlier this spring, Canada intensified its efforts to thwart steel dumping by instituting a 25% reciprocal tariff on steel imports, continuing its 25% surtax on Chinese steel, and inviting feedback from the steel industry to address dumping and mitigate its effects. 

During an SMU Community Chat in May, Barry Zekelman, executive chairman and CEO of Zekelman Industries, warned that steel dumping in Canada poses a threat to both the US and Canadian steel industries.  

“As of 2024, Canada imported 3.2 million metric tons of various steel products from the worst countries in the world, and Canada puts a 25% duty on China,” he said. 

“Canada needs to push that crap out of here, so Canadian steel mills can supply the Canadian market,” said Zekelman, who was born and raised in Canada. 

He added, “Canadian steel mills can do well, and they won’t have to look south of the border. As a matter of fact, if we displace all of that, Canada will be a net importer of steel from the US, and then the duty should go away.” 

A US service center source expressed similar sentiments this week.  

“They have trouble selling in their own country as so much cheap foreign steel is being imported by Canada. The head of Algoma said as much,” said the source.  

Zekelman does own shares in the Ontario-based steel producer, but the service center source is referring to recent comments by Algoma Steel’s CEO, Michael Garcia.

The market sees tighter control over steel and aluminum into Canada and Mexico as an important commitment the nations can make to the US.  

A secondary source told SMU last week that the topic of steel and aluminum is only a fraction of the discussion in trade negotiations. He said it’s hard to predict whether Section 232 sticks.  

The same Midwest-based service center source imagines that Canada’s steel may enjoy a reprieve, contingent on its commitment to end dumping, but ultimately believes only Trump knows what he will do.  

“Anyone who tells you they know something is not telling you the truth. No one knows what he will do next. We do expect tariffs with Mexico/Canada to be lowered or completely dropped. The question is when. Could be tomorrow, could be a long way out. No one but the President can answer that question,” they said.