Canada Tariffs Deepen North America’s Steel and Aluminum Squeeze

The renewed trade war between the United States and Canada adds even more uncertainty to the complex steel and aluminum supply chains critical for heavy manufacturing and North America’s automotive industry.Last week’s breakdown in trade talks led to a quick escalation of tariffs and counter-tariffs, which the two close trading partners announced on each other’s imports. The trade war escalation will hit trade in key metals such as steel and aluminum and force producers and importers to seek longer-term solutions to the heightened uncertainty about the cost of materials supply.There won’t be a clear winner in this new trade escalation, as supply chains are so complex and intertwined that businesses on either side of the U.S.-Canada border may have to pay tariffs multiple times because many materials and products physically cross the border multiple times, analysts say.After trade negotiations broke down, the U.S. imposed tariffs on $20 billion worth of Canadian goods, including alcohol, hockey sticks, cement, and machinery, to name a few.Related: Oil Prices Surge as U.S. and Iran Exchange StrikesCanada retaliated by announcing counter-tariffs to come into effect on September 8 on sectors including steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, and electronics.“In certain sectors, such as steel and aluminum, existing counter-tariffs will increase from 25 per cent to 50 per cent to match U.S. rates,” Canada’s government said as it vowed to match the U.S. tariffs – effective August 22 – dollar for dollar.The re-escalation in the trade war in North America is putting a lot of businesses in a bind to sort through their supply chains to see which items would now be more affected by the new tariffs.The U.S. is not necessarily the winner of the tariff war launched by President Donald Trump. In all sectors, the initial impact would be chaos and a drive to prepare for long-term supply chain shifts, according to analysts.“Expect much more of this uncertainty for some time to come,” Atsi Sheth, chief credit officer at Moody’s Ratings, told CNBC, commenting on the fallout from the renewed trade tensions.The U.S. steel sector may have a slight advantage over Canada, but the highly complex automotive sector, where materials and parts often cross the border multiple times before being assembled in a finished vehicle, will lose—on both sides of the border, according to Sheth.“For the auto sector, our view is that the sector is so integrated that the tariffs just don’t impact the country you are tariffing but your own country,” the Moody’s expert told CNBC.“The auto sector, there are no winners. Steel ... U.S. has a little edge,” Sheth said, noting that the U.S. steel market is larger than Canada’s.In the aluminum industry, the U.S. will not bring aluminum production home with tariff policies only, Ewa Manthey, a commodities strategist at ING, said in an analysis last week.In the first half of 2026, Canada supplied 60% of all unwrought aluminum imports in the U.S., ING Research has estimated based on U.S. customs data.The US currently produces around 750,000 tons of primary aluminum a year, while imports meet around 85% of domestic needs.“Restarts and expansions could narrow the gap, but new capacity takes years to permit, finance, build and ramp up. Until then, the US will continue to rely on higher-cost imports,” Manthey said.Until new capacity comes on line – in years – “US manufacturers will continue to need Canadian aluminium – and pay the tariff on it,” the strategist said.The AI boom could complicate the aluminum buildout—data centers use aluminum in power cables, cooling systems, server racks and buildings. They also compete with smelters for electricity supply, which could delay the targeted massive boost to domestic U.S. aluminum production.“If the goal is to reduce US reliance on imports, tariffs are only part of the answer,” ING’s Manthey said.“The US also needs affordable power, infrastructure, long-term investment and policy certainty.”By Tsvetana Paraskova for Oilprice.comMore Top Reads From Oilprice.comVenezuela Helped Build OPEC. Now It May Help Break It ApartQatar Extends Force Majeure as Hormuz Crisis Still Blocks LNG TrafficMIT Uses AI to Challenge a Century-Old Process for Mass Ammonia Production