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US-ally trade wars

Canada preparing steel quotas and tariffs on China and other suppliers to ward off dumping following Trump’s trade war

The government hopes to protect against a surge of imports that might come from global producers trying to evade US tariffs

PUBLISHED : Wednesday, 27 June, 2018, 3:03am
UPDATED : Wednesday, 27 June, 2018, 3:42am

The Canadian government is preparing new measures to prevent a potential flood of steel imports from China and other global producers seeking to avoid US tariffs, people familiar with the plans said on Tuesday.

The measures are said to be a combination of quotas and tariffs aimed at certain countries including China, said the people, who asked not to be identified because the matter is not public.

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The moves follow similar “safeguard” measures being considered by the European Union intended to ward off steel products that might otherwise have been sent to the US. They come alongside Canadian counter-tariffs on US steel, aluminium and other products that are set to take effect on Sunday.

The steps intensify the fallout from US President Donald Trump’s trade fight, in particular new US tariffs of 25 per cent on steel and 10 per cent on aluminium that hit Canada, the EU and other nations. The moves have prompted retaliation from the US’s biggest trading partners.

The Canadian measures are expected to include new quotas on certain steel imports to prevent dumping, with tariffs applied above that threshold, the people said. The announcement could come as early as next week, though the government has not yet finished its plans, the people said.

A spokesman for Finance Minister Bill Morneau declined to comment. Representatives for Foreign Minister Chrystia Freeland, who handles US trade issues, did not immediately return requests for comment.

Canadian steel imports in 2017 totalled US$9 billion, according to US data, with 55 per cent of that coming from the US. The next biggest sources of Canadian steel are China, South Korea, Brazil and Turkey, the data show.

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The US steel tariffs open the door to a potential flood of cheap imports, said Sean Donnelly, chief executive officer of ArcelorMittal Dofasco.

“We must be able to operate in an undistorted, market-based competitive environment,” Donnelly told lawmakers at a parliamentary committee in Ottawa on Tuesday. “Canada’s response to past and future threats from unfairly traded and diverted offshore imports is critical.”

Steel groups have been pressing for safeguard measures, which could be applied provisionally pending an investigation. Joseph Galimberti, president of the Canadian Steel Producers Association, said his members are seeing the impacts of steel diversion in Canada’s market.

The industry group’s members include ArcelorMittal Dofasco, Stelco Holdings Inc, Essar Steel Algoma Inc and others.

“We are entirely supportive of the safeguard as an appropriate measure and have been working with government to provide them the commercial information they need to proceed as appropriate,” Galimberti said in an email Tuesday.

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Shares of Stelco, one of the few publicly traded steel producers in Canada, jumped as much as 2.5 per cent in Toronto while by mid-session Alcoa Corp shares rose nearly 3 per cent, to US$45.58, on the New York Stock Exchange.

Any additional tariffs enacted on foreign steel will have a ripple effect on the Canadian economy and raise costs in the nation’s housing sector, which is already under stress.

Only a handful of Canadian companies produce steel and construction companies, steel fabricators and developers rely on imports for various types of steel, including those used for residential building such as rebar.

“Construction companies and owners will have to pay more in the short term out of their own pockets,” Richard Lyall, president of the Residential Construction Council of Ontario, said in a telephone interview.

“It’s a hit that can affect risk profile and pro formas for future projects, which can have a chilling effect on the market. But the medium to longer term is consumers will get hit by this.”