Netizen 24 CAN: In Hamilton, where thousands owe their paycheques to steel, a city braces for Trump's tariffs

Posted by On 8:37 AM

In Hamilton, where thousands owe their paycheques to steel, a city braces for Trump's tariffs

Fri., June 1, 2018

The 25 per cent tariff on Canadian steel imposed at midnight Thursday will inevitably cause U.S. border chaos for Hamilton steelmakers as American officials struggle to enforce the new rules, Hamilton’s Chamber of Commerce says.

“I hate to be alarmist but I feel there is going to be a major backup at the border,” says Keanin Loomis, the CEO of the Hamilton Chamber.

A worker operates machinery inside the ArcelorMittal Dofasco steel plant in Hamilton.
A worker operates machinery inside the ArcelorMittal Dofasco steel plant in Hamilton.

“Think about it. When that first truck crosses the border, is the border patrol agent going to be ready? And the effects after that are only going to be compounded.”

But how the trade sanctions will play out over the coming weeks is far from certain.

Analysts say the Canadian steel industry â€" as well as the aluminum sector that will be slapped with a 10 per cent tariff â€" can manage a short-term spike in prices. But if the tariffs drag on amid stalled NAFTA talks, there could be devastating effects to steel and aluminum companies, higher prices for consumer goods and even a full-scale trade war.

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U.S. President Donald Trump announced Thursday morning that for “national security” reasons he was imposing the tariffs on Canada, Mexico and the European Union, all of which he had previously exempted.

Prime Minister Justin Trudeau said the tariffs were “totally unacceptable” and retaliated with tariffs on d ozens of U.S. products to go into effect July 1 if the American tariffs are still in place.

Loomis says Hamilton has more than 9,000 jobs in steelmaking, with ArcelorMittal Dofasco being the largest employer with nearly 5,000.

“The steel sector is not as big as it used to be proportionately in Hamilton, but it is still a huge part of our economy,” said Loomis.

He said considering spinoff jobs, more than 40,000 people owe their paycheques to steel in the Hamilton area. An estimated 43 per cent of Canada’s steel is made in Hamilton.

Canada ships about $6 billion in steel products to the U.S. annually, and about the same amount flows from the U.S. to Canada.

Neither Stelco or ArcelorMittal Dofasco would comment, referring questions to the Canadian Steel Producers Association.

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Joseph Galimberti of the steel producers association said, “This will have a really significant effect on the industry.”

He said he did no t know how much steel Hamilton steelmakers sell in the U.S. But he said about half of the steel produced across Canada is exported into the U.S.

“Applying a 25 per cent tariff on steel when we have had a fair and balanced relationship in trade in that product for a generation is surprising. I think the entire process has been pretty alarming,” he said.

“A 25 per cent tariff in Canada’s largest export market is a really significant competitive disadvantage and by extension that implies a pretty significant threat to investment in Canadian steel.”

In a recent Spectator interview with Stelco CEO Alan Kestenbaum, he said 80 per cent of Stelco’s sales are in Canada. But the company’s growth strategy involves making greater inroads into the American market, especially when it comes to high-grade steel in the automotive industry.

A recent Stelco management and discussion report said trade actions by the U.S. are “a potential risk, (but) we believe th is risk may be mitigated by our continued focus on the development of additional markets for our products. In addition ... there is associated risk of steel imports traditionally destined for the United States being diverted into the Canadian market which could impact domestic demand and pricing. We continue to monitor these developments ...”

Gary Howe, president of Local 1005 that represents Hamilton workers at Stelco, says, “we’re trying not to panic” and he noted that most of Stelco’s business is in Canada and would not be affected by the tariff.

Hamilton Mayor Fred Eisenberger said “in terms of direct employment impact, nobody knows how this is going to play out.

“But this is bad for not only the Canadian economy but the American economy as well,” he said. “Canada’s closest ally is the United States and I am still hopeful that saner heads will prevail.”

Loomis contends that American steel buyers do not have alternatives to Canadian s teel, so they will simply have to pay the higher price.

“It’s going to cause companies buying steel in the U.S. to look elsewhere but they are not going to find domestic capacity to fill the hole. So they are going to end up paying extra which they will pass on to the consumer.”

McMaster University economist Atif Kubursi, an expert in international trade, said the big consideration is how long the tariff remains in force.

If it is short-lived, the effect will be minor, but if it drags on “our ability to sell steel in the U.S. will be much less.”

“It will also increase the cost of living, causing hardships on consumers and on the ability of the economy to adjust and remain competitive with other countries that don’t have to pay the tariff.”

He feels the move is a tactic to try to force concessions in the stalled NAFTA talks. Kubursi describes the move as a “typical Trumpian tactic” that is likely to fail.

“It is part of the Art of the Deal that should backfire,” Kubursi says. “We cannot continue to reward this irrational behaviour.”

With files from Steve Buist and Canadian Press

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