Canadian industry warns that trade uncertainty from US tariffs could deter investment and raise costs
The Donald Trump administration's continued threats of new tariffs have raised concerns among Canadian industry leaders, who warn that the uncertainty could destabilize the economy.
According to Financial Post, Trump is set to impose a 25 percent tariff on Canadian aluminum on Wednesday, with an additional 10 percent tariff planned for April.
However, the situation remains fluid, with previous tariffs being paused, adjusted, or lifted after brief enforcement.
Jean Simard, chief executive of the Aluminum Association of Canada, said he no longer believes the tariffs are about border security or trade negotiations with Canada and Mexico.
Instead, he views them as a strategy to create uncertainty that discourages investment in Canada.
“That’s my take on it,” he said. “That’s the overarching objective: nurturing uncertainty to make the US the only safe harbour for investments. It’s awful.”
Simard suggested that Canada could face years of tariff reprieves and reinstatements, disrupting the duty-free trade relationship that has long driven economic growth.
While few Canadian goods have been subjected to tariffs, frequent delays and threats have heightened uncertainty.
Several leaders, including new Liberal leader Mark Carney, Conservative leader Pierre Poilievre, and Bank of Canada governor Tiff Macklem, have noted that this environment discourages investment in Canada.
Aluminum was originally set to face a 25 percent tariff in early February, but the enforcement was delayed to March 4, briefly enacted, then lifted and postponed again until April 2.
Trump's original tariff order included an exemption that reduced tariffs on energy-related products, including aluminum, to 10 percent. However, a 25 percent tariff remains a possibility on Wednesday.
Additionally, Trump is threatening reciprocal tariffs in April on all exports to the US, mirroring foreign value-added taxes, sales taxes, and tariffs on US goods.
Simard dismissed the notion that tariffs would lead to the return of manufacturing jobs to the US, arguing that the country lacks the necessary energy capacity for large-scale aluminum production.
The US produces 700,000 tonnes of aluminum annually but imports 4.3 million tonnes, with Canada supplying 2.7 million tonnes.
Producing aluminum is energy-intensive, with Simard noting that US production consumes electricity equivalent to the Hoover Dam’s yearly output—10,000 megawatt hours.
The amount of energy required is comparable to the annual electricity consumption of Nevada, he added.
With US data centres also competing for energy resources, domestic aluminum production remains limited. As a result, US aluminum will become more expensive, impacting the entire sector.
The US-based Aluminum Association, which represents producers and consumers, is pushing for tariff-free access to Canadian aluminum.
“It’s been 45 years since the US built a new primary aluminum smelter,” said Charles Johnson, president of the Aluminum Association, in a February LinkedIn post.
His group noted that Trump imposed a 10 percent tariff on Canadian aluminum during his previous term, but no new smelters were built.
However, US$10bn has been invested in the US aluminum industry since 2016.
Johnson stated that tariffs could encourage investment in a new smelter if paired with new energy infrastructure.
Still, he cautioned that it would take “many years” before the US could fully meet its aluminum needs.
“That’s why we need the action from the White House, and a reliable source of metal from Canada to support the jobs and investments happening today,” he said.
Johnson attributed global market instability to China, Russia, and other “non-market economies” that sell discounted aluminum, sometimes rerouting it through third countries to avoid tariffs.
Simard acknowledged that the US relies on Canadian aluminum but said uncertainty remains.
“It’s just keeping uncertainty as it goes,” he said. “Playing with the markets, seeing how they react. That’s what we’re dealing with.”
The broader implications of these tariffs extend beyond the aluminum industry. For instance, the US auto industry could face significant challenges due to increased production costs and disrupted supply chains, as reported by the Associated Press.
