Canada Introduces Tariffs on Steel Imports amid Potential Risk of Dumping

On Thursday, Canada unveiled new quotas and tariffs on imports of seven categories of steel from majority countries, exempting few in the light of the potential rise in steel imports post U.S. steel tariffs announcement in Mar'18.

Canada's steel industry has complained in recent months that U.S. tariffs on steel and aluminium, imposed on national-security grounds are affecting most countries resulting in diversion of cheap steel shipments to Canada instead of U.S.

Beginning 25 Oct'18, imports of seven steel products will be subject to a 25% surtax when the level of those imports exceeds historical norms, according to a release from the Department of Finance.

The seven products are:

o Heavy plate
o Concrete reinforcing bar (rebar)
o Energy tubular products
o Hot-rolled sheet
o Pre-painted steel
o Stainless steel wire
o Wire rod

As per the industry experts, the new measures are also likely to address concerns from the Trump administration that foreign companies are using Canada as a backdoor to move their metals into the U.S. Canada is trying to convince the U.S. to lift tariffs on steel and aluminum imports from Canada, which it imposed earlier this year on national-security grounds. Canada is the largest foreign supplier to the U.S. of both metals. However, another set of experts believe that the government of Canadian Prime Minister Justin Trudeau is pessimistic about the chances of the U.S. tariffs being removed soon.

During talks on the new United States-Mexico-Canada Agreement (USMCA) which has replaced NAFTA (North American Free Trade Agreement), U.S. officials told Canada that they wanted a quota arrangement for steel and aluminium imports similar to that of South Korea (South Korea agreed to cut exports by 30% of the past three years' average).

However, Canada rejected the demand and made clear any cap on the metals would have be at a level higher than current exports to allow room for shipments to grow.
According to the reports, Mexico isn't happy about Canada's steel measures and "will take action to protect its own exporters in the short term, according to a statement from Mexico's economy ministry on Thursday."

Canada's steel trade dynamics

In 2017, Canada imported 8.7 MnT of steel, an increase of 13% against previous year imports of 7.7 MnT. In ongoing year from Jan-Jun'18, Canada imported 4.6 MnT of steel, a 13% rise against 4.1 MnT of steel imports during the corresponding period of previous year with highest imports coming from U.S. (2.5 MnT) followed by China at 0.3 MnT and Turkey at 0.22 MnT. India does not account in Canada's list of top ten steel sourcing countries.
Canada exported 6.7 MnT of steel in 2017 and 3.7 MnT of steel in the first six months (Jan-Jun) of 2018.

Canada being net importer of steel, these safeguards measures are likely to hurt its construction sector quite badly. The products on which quotas have been announced are used to build condominiums, dams, bridges. In fact a lot of imported structural steel has been put toward the refurbishment of the Parliament buildings.

Subsequently, the government is also requesting that the Canadian International Trade Tribunal conduct an inquiry to determine whether long-term measures are warranted. The provisional tariffs will be in place for 200 days while the tribunal comes to a decision.