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Canada Announces New Steel Quotas and Tariffs, Refunds for Firms

Natalie Wong and Josh Wingrove

(Bloomberg) -- Canada is applying quotas and a 25 percent tariff on steel imports from China and other countries to avoid becoming a dumping ground for steel in the face of metal levies imposed by U.S. President Donald Trump.

Canada will erect new barriers to any flood of shipments of seven types of foreign steel, and will issue refunds and exemptions to some Canadian firms on tariffs paid on imports from the U.S.

Prime Minister Justin Trudeau’s government faces continuing trade tensions with the U.S., which hit Canada, the European Union and other nations with tariffs of 25 percent on steel and 10 percent on aluminum this summer. Canada responded with its own tariffs on steel and aluminum and other products.

“We have discussed safeguards with the government for a very long time, and feel like there is significant evidence” in favor of it, Joseph Galimberti, president of the Canadian Steel Producers Association, said before the announcement. “The safeguard is a warranted and badly needed action.”

While Canada and the U.S. reached a deal to replace the North American Free Trade Agreement this month, the metals tariffs are slated to be dealt with separately. The sides remain at odds.

“We continue to discuss the section 232 tariffs with our U.S. counterparts. Our position remains clear and firm: these tariffs are entirely unjustified,” Adam Austen, a spokesman for Canadian Foreign Minister Chrystia Freeland, said in an email Thursday. “The best economic outcome for both countries would be for the U.S. to remove these tariffs.”

Seven Products

The new safeguard measures announced Thursday affect seven types of products, up from three initially identified. The seven include heavy plate, concrete reinforcing bar, energy tubular products, hot-rolled sheet, pre-painted steel, stainless steel wire, and wire rod.

Tariffs of 25 percent will apply above an average of recent import volumes -- in effect, a quota with tariffs applied above that level. The provisional tariffs take effect on Oct. 25. The Canadian International Trade Tribunal will hold an inquiry on whether to eventually finalize those.

The new quotas and tariffs will affect countries such as China and Turkey, but not Canadian steel imports from the U.S., which are already subject to other duties. Mexico is partially exempted, while Chile, Israel and some developing countries are exempt.

Mexico expressed disappointment at its partial inclusion and said it would study if the measures violate Canada’s Nafta commitments.

Refunds, Relief

The “targeted relief” for Canadian firms includes refunds of import tariffs paid to date on steel and aluminum products that Canada is facing shortages of, for certain firms. Those whose claims are accepted will be refunded tariffs paid so far, and also won’t have to pay them going forward -- either until the end of this year, or indefinitely, depending on how severe the shortage.

“The Government recognizes that Canadian countermeasures against U.S. imports can create challenges for Canadian manufacturers that rely on steel and aluminum imported from the U.S.,” the finance department said in a written statement. “A portion of this relief will be temporary, offered until such time that Canadian producers are able to adequately meet domestic demand.” Applications for refunds or exemptions will be handed on a case-by-case basis, and the Canadian counter-tariffs still apply, the government said.

In August, Finance Minister Bill Morneau announced a consultation period to look at potential safeguard measures that would be applied if it found that producers are being harmed. Bloomberg News first reported in June that the Trudeau government was looking at new measures, including a combination of tariffs and quotas, that would target certain countries including China to prevent steel divergence into Canada.

(A previous version of this story was corrected to show Mexico is partly exempted from Canadian safeguard tariffs.)

(Updates with Mexico response in fourth-last paragraph.)

--With assistance from Eric Martin.

To contact the reporters on this story: Natalie Wong in Toronto at nwong133@bloomberg.net;Josh Wingrove in Ottawa at jwingrove4@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Chris Fournier

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.

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