Canada's steel industry is bracing for tariff pain. Aluminum? Not so much

CBC

02-03-2025

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In the on-again, off-again talk of tariffs on Canadian products being sold into the United States, Jérôme Pécresse has advice for his industry: "Be patient, be calm, be agile."
Pécresse is chief executive of aluminum for Rio Tinto, which includes overseeing the company's Canadian smelter operations.
Though most of those are in Quebec, where Pécresse is based, this past week he paid a visit to Kitimat, on B.C.'s North Coast, where a Rio Tinto aluminum smelter employs roughly 1,100 people in the community of just over 8,000.
But, Pécresse said, no one in the community should be worried about losing their job.
While Canadian steel producers say they have already felt the imapct of tariff threats with more pain to come, their aluminum-making counterparts remain relatively sanguine.
"Obviously it's a concern," Pécresse said, speaking to CBC Daybreak North host Carolina de Ryk, saying ultimately markets prefer stability. But he also pointed out that since every other aluminum-producing country that sells to the United States is getting hit by the same tariffs, Canada's position remains strong.
"If everybody's taxed the same, it's probably something that's not going to materially change our volumes... into the U.S. market."
Pécresse's confidence is borne out in the numbers: Unlike steel, which has near-parity when it comes to Canada-U.S. trade, the United States' dependence on Canada for aluminum is stark: the U.S. imports more than three times as much aluminum from Canada as it exports. According to World Bank data, the U.S. is the world's largest aluminum importer, with the bulk coming from its northern neighbour.
And U.S.-based buyers know it: Jean Simard, CEO of the Aluminum Association of Canada, says most contracts between Canada and the United States have a clause built in agreeing that the American company purchasing Canadian aluminum will pay whatever tariffs are put in place.
In fact, when Trump imposed aluminum tariffs during his first term, Canadian companies saw their value spike, prompting one person in the industry to describe it as the president writing "a cheque for $600 million to Canadian aluminum producers," as roughly half a billion in value flowed northward.
Further, the U.S. doesn't have much in the way of options for domestic production: it's estimated that just one Canadian smelter comes close to equalling the entire output of the U.S. industry.
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While the province's second largest industry has a built-in firewall against President Donald Trump's tariffs on Canadian exports to the U.S., the complexity of the aluminum-related trade relationship between Quebec and the U.S. means effects will still be felt.
One reason for that is the cost of electricity in the United States compared to Canada, a key component in running a smelter. Quebec and B.C. have access to cheap hydropower to run their plants, U.S. producers do not.
Mario Simard and Alexis Brunelle-Duceppe, Bloc Québécois MPs for the Jonquière and Lac-Saint-Jean ridings which have thousands of aluminum jobs, told Radio-Canada that the Canadian hydropower advantage can't easily be replicated.
"A dam can't be folded," Simard said in a French-language interview. "It can't be put in a suitcase, moved south of the border."
Brunelle-Duceppe said it was tough to understand what Trump hoped to gain for the U.S.-based industry by tariffing Canadian aluminum, given the realities of the industry.
"Aluminum smelters closed in the United States because, precisely, it costs too much energy," he said in French.
That sentiment has been echoed by U.S. aluminum producers, including Pittsburgh-based Alcoa, which also operates in Canada. CEO Bill Oplinger was quoted by Reuters warning a mining conference that he expects tariffs to cost the U.S. aluminum industry roughly 20,000 jobs.
"It's bad for American workers," Oplinger is reported as saying, adding that he's lobbied for an exception for Canadian aluminum. He said without cheaper electricity in the United States, there's no way for that country's aluminum industry to compete with Canada's, even with the addition of tariffs.
And in Kitimat, Pécresse said Rio Tinto has the added bonus of easy access to Asian markets through the Port of Prince Rupert.
None of this means there won't be any impact on Canadians as a result of aluminum tariffs. Like steel, aluminum is passed back and forth across the border during the production of products like cars or construction materials. As a result, tariffs will increase the product end-price for consumers. And companies that sell or buy products with aluminum will also be hit when making cross-border sales — such as beer cans and lids that are made in the U.S. using Canadian aluminum and then imported back across the border by B.C. beer makers.
But for those involved in the production of aluminum itself, industry leaders say, it should be business as usual.