Responding to US Steel/Aluminium Tariffs

Welcome back to Middle Ground; this is the fifteenth newsletter of our 28 policies in the 28-day series ahead of the 2025 Ontario provincial election.

Today’s issue will discuss how Canada should respond to the US tariffs on steel and aluminum.

What are the US Steel/Aluminium Tariffs?

Earlier this week, President Trump announced a 25% tariff on all steel and aluminum imports into the United States starting March 12th. Canada is the largest exporter of steel to the United States, selling ~$7.5B of steel and ~$11.4B in aluminum to the United States in 2024. 

Trump previously placed a 25% tariff on steel and a 10% tariff on aluminum in March 2018, during his first term, leading to a reduction of ~$1B in imports each of steel and aluminum. At the time the Canadian government responded with counter-tariffs on a series of US products. 

What is our response? 

As usual, politicians are proposing counter-tariffs in response. Jagmeet Singh is proposing a 100% tariff on all Teslas, while Industry Minister François-Philippe Champagne said the country will work with other international partners to determine countermeasures. 

Why do we need a new approach?

Less than a month into President Trump’s second term, it is becoming clear that the United States is no longer a trustworthy economic or political partner for Canada.

Generations of economic policy in Canada has been developed based on the assumption that the United States would always support and assist Canada. For example, we introduced 100% tariffs on Chinese EVs in October 2024, assuming that this would allow Canada to work with US automotive manufacturers to build our own EVs in Detroit and Ontario. Today, these tariffs on aluminum are crippling the North American automotive industry as aluminum is a primary component in any car. 

We can no longer build our economy on the assumption that the United States will cooperate and work with us. 

What should our response be?

The objective of counter-tariffs is to pressure another country into removing their tariffs. This should no longer be our objective.

Instead, Canada should work to replace the American demand for steel and aluminum. In the long term, this means increasing the capacity of our transportation systems so that we can use trains to bring these resources to our shores, where they can be shipped anywhere in the world.

In the short term, while we build that infrastructure, we should focus on increasing local demand for these resources. One way to do that is to encourage more housing development.

Aluminum and steel are key components of high-rise and mid-rise building developments. Canada has a massive housing shortage, and these tariffs can provide an opportunity to use one problem to solve the other. Here is how:

• Alter the building code to allow 12-story small-scale apartments (similar to those in Europe) - These buildings can use more steel/aluminum instead of lumber

• Defer all development charges for apartment buildings for the next five years. All developers must keep all units in these buildings on the rental market for 25 years. If they sell before that or occupy the unit, the development fees become payable (with interest). 

• Provide equity grants of $2-5k per unit (depending on size) to developers for every rental unit constructed. (These grants must be repaid if the unit is sold or occupied within 25 years.)

• Alter CMHC regulations to provide 100% LTC loans to developers of purpose-built rentals, as long as the loan amount is under 90% of the expected LTV after construction.

• Have the provincial and federal governments create a housing incentive pot to reward cities that build quickly. The pot would include $10k for each housing unit that goes from zoning application to permit issues in less than three months. Once the unit is constructed and rented, the city would receive an additional $15k.

• Fund free job retraining programs for anyone wanting to get into construction-related trades (plumbing, architecture, electrician, painting, flooring, insulation, etc.)

These measures would drastically start attacking the housing crisis while providing a new market for Canadian steel, aluminum (and lumber). Finally, for those who lose their jobs due to the tariffs, it provides a career path to be retrained and gain skills that will be in demand. 

If you learned anything from this newsletter, forward it to one person who would benefit from these insights.

Liam Gill