Canada: Updated: Steeling For A Fight — U.S. President Trump Announces Tariffs On Imported Steel And Aluminum

U.S. President Donald Trump signed a proclamation this afternoon, formally implementing the 25 per cent tariffs on steel imports and 10 per cent tariffs on aluminum imports as discussed below. They are expected to take effect within 15 days.

Of major significance is that Canada and Mexico are, at least initially, exempt from the new blanket tariffs. These are the only exemptions provided under President Trump's proclamation. However, in his speech prior to signing, and in the backgrounder released by the White House, the president made clear that maintaining these exemptions are subject to ongoing progress in the NAFTA negotiations, and that failure to make meaningful progress in those negotiations will lead to their revocation. This puts the spotlight on the ongoing NAFTA negotiations, scheduled to conclude at the end of the month, and potentially puts direct pressure on Canada and Mexico to offer other concessions. The president did invite other countries to negotiate with U.S. Trade Representative Robert Lighthizer to address American concerns and potentially win complete or partial exemptions.

While the exemptions for Canada and Mexico are good news for steel and aluminum businesses, as well as businesses with cross-NAFTA-border integrated supply chains in those countries, Canadian and Mexican businesses are still likely to be impacted by the new tariffs. There are real concerns about foreign steel and aluminum, which are effectively tariff-barred from the U.S., flooding the Canadian and Mexican markets. This may be good news for some Canadian and Mexican businesses, but bad news for the Canadian and Mexican steel and aluminum industries – although the news would be much worse if they were subject to tariffs on exports to the U.S.

BLG's International Trade Group will continue to monitor developments as they happen, and is pleased to answer any questions that may arise.

March 7, 2018

U.S. President Donald Trump announced plans to unilaterally impose blanket 25 per cent tariffs on steel imports and 10 per cent tariffs on aluminum imports from all exporting countries. This has significant impacts for Canada's steel, aluminum and related industries.

The Trump administration claims the ability to levy these blanket tariffs through a seldom-used 1962 U.S. law that allows the president to implement safeguard tariffs without congressional approval based on "national security." President Trump — predisposed to the use of executive orders — would apply tariffs notwithstanding congressional powers to impose tariffs under the U.S. Constitution. Safeguard tariffs are emergency tariffs that are put in place to stop a sudden, unforeseen and damaging import that could seriously damage a particular industry. President Trump has stressed the need for the tariffs in order to protect U.S. national security on the basis that the military needs a domestic supply of aluminum and steel for its tanks and ships. He tweeted on March 5 that "To protect our Country we must protect American Steel!"

Impacts to Global Trade

The Trump administration's actions threaten to have major implications for trade and the global economy as a whole, including significant impacts on the future of NAFTA, which President Trump has already targeted for overhaul dating back to his campaign for the Presidency.

The action undertaken by the U.S. can be technically considered legal under Article XXI of the General Agreements on Tariffs and Trade 1994 ("GATT"), which allows WTO members to impose measures, "which it considers necessary for the protection of its essential security interests," and the functionally equivalent national security defence set out in Article 2102 of NAFTA. The determination of what is necessary is left to the individual country. The Trump administration's determination, whether reasonable or not, is therefore a theoretically adequate basis for the imposition of the tariffs.

However, it is clear that these provisions were intended to be reserved for "worst-case scenarios," and to be used sparingly to deal with only the most compelling of national security concerns. To date, these provisions have been used in extremely rare cases. Their only use by the U.S. has been to justify a trade embargo of Nicaragua in 1985, and various measures against Cuba in 1996. The only other known use of safeguard tariffs in these circumstances was in 1975, when Sweden imposed quotas on certain footwear imports for national security purposes, claiming that its army's need for shoes made the protection of the domestic industry critical.

The international community has responded to President Trump's announcement with near-universal condemnation, strongly disagreeing with his characterization of the blanket tariffs as a measure to protect national security. In particular, Canada, Mexico and the European Union have been outspoken, pointing out that if the tariffs were tailored to apply to only China and certain other countries which can reasonably be argued to be engaging in unfair trade practices respecting exports to the U.S., the national security claim might be defensible. Instead, these critics see the blanket application as revealing the true character of the tariffs — protectionism.

In rejecting the Trump administration's classification of the tariffs as "national security" measures, trading partners led by the EU have indicated that they will consider them to be "safeguard" actions, governed under the WTO's Agreement on Safeguards ("SG Agreement"). Under the SG Agreement, safeguard measures are legal, but other member states may immediately implement proportional countermeasures if they do not receive compensation for the new trade restrictions within 90 days. Such reprisals would require a ruling of a WTO dispute resolution panel if the tariffs were true national security measures, which would likely take at least 18 months to resolve, plus potential further delays for an appeal to the backlogged WTO Appellate Body. Therefore, this characterization of the tariffs as safeguards, which is unlikely to be susceptible to successful challenge by the U.S. (and even if it was, it could only be through the same dispute resolution procedure described above), will allow near-immediate reprisals in compliance with global trading rules, quite possibly facilitating a trade war.

Furthermore, other WTO members may choose to "fight fire with fire," and use the seemingly unfounded U.S. determination of national security concerns to justify, at least implicitly, their own ad hoc determinations of the need for tariffs in the interest of national security. While ideally these would be limited to retaliating against the U.S., countries may find it difficult to justify such a limitation, which could lead to borders closing or excess costs being imposed on imports from the rest of the world — a potentially disastrous result for global trade.

In that situation, the best hope for WTO system would be for the veracity of the American national security claims to be formally challenged before a WTO dispute resolution panel. This would be a precedent-setting case, as the use of national security exemptions in this manner has never been considered by a WTO panel or the Appellate Body. This case would, assuming WTO members abide by the decision, hopefully outline clear criteria as to the nature of national security concerns that can legitimately be addressed under GATT Article XXI and other similar provisions in global trade agreements. However, as noted above, this decision could be years away, potentially allowing serious economic damage to be done in the interim.

Unique Canadian Impacts

Although many Canadians held out hope that Canada would be exempt from any proposed steel or aluminum tariffs, it is clear that President Trump wants to use them as an incentive to gain other concessions from Canada and Mexico in the ongoing NAFTA renegotiations. Therefore, he has been clear to date that he will not provide exemptions for the U.S.'s NAFTA partners. Canadian Finance Minister Bill Morneau characterized this strategy on March 5 as President Trump "chang[ing] the terms of the discussion" in the middle of the negotiations, while other Canadian officials have strongly objected to the suggestion that imports of steel and/or aluminum from Canada could adversely affect U.S. national security, given the countries' longstanding close military collaboration.

If the proposed tariffs are imposed against Canada, it could gravely effect Canadian businesses which depend on exporting steel and aluminum to the U.S. The export of steel and aluminum to the U.S. comprises an over $15 billion per year industry for Canada, with almost 90 per cent of Canadian steel exports going directly to the U.S. in 2017. In 2017, the U.S. imported 26.9 million tonnes of steel, and more than four million, or 16 per cent of this total, came from Canada, making Canada the U.S.'s biggest supplier of steel.

The supply chains of numerous major industries are integrated across Canada and the U.S., and in many cases Mexico as well, with steel and aluminum parts often crossing borders multiple times during the process of manufacturing a final product, such as a car. The proposed tariffs threaten to wholly disrupt this process, which in addition to leading to dead-weight loss by distorting steel and aluminum firms' competitiveness for various contracts based on which side of the border they are on, would likely impose further such losses by forcing the whole-scale remaking of supply chains to remain on one side of the border.

Canadian Responses

On March 2, Canadian Foreign Affairs Minister Chrystia Freeland raised concerns about President Trump's decision, noting that Canada buys more than half of U.S. steel exports, providing a US$2 billion surplus to the U.S. This veiled threat of retaliation by Canada's imposing similar tariffs on imports of U.S. steel, combined with various other statements from Canadian officials, suggests that retaliation is being strongly considered.

Although Canadian retaliation through NAFTA channels is possible, this is not certain, as NAFTA does allow for exceptions for tariffs enacted in protection of national security. Despite this, there is a possibility that Canada could utilize the special dispute resolution mechanisms set out in NAFTA to remedy the situation. This process is, notably, currently in a state of flux, as the current NAFTA negotiations centre prominently on the future of Chapter 19, with the Trump administration wanting this chapter removed.

Canada is more likely to seek redress outside of NAFTA through the WTO, joining what is likely to be many other complainants, including the EU. This path is not unique, as demonstrated by Canada's WTO challenge launched in January 2018 to American administration of its trade remedy laws, particularly its practice of treating export restrictions as a countervailable subsidy. This would permit Canada to follow the same procedure likely to be followed by the EU and others to impose countermeasures under the SG Agreement, while also pursuing a challenge through the WTO dispute resolution procedure. Recent reports from the Washington-based Peterson Institute for International Economics noted that Canada could be entitled to trade retaliation measures worth in the neighbourhood of US$3.2 billion as a result of the proposed tariffs.  

Overall, the implications of these tariffs risk are severe, starting with the fact that they may spark a global trade war. Furthermore, the tariffs are certain to factor into the continuing NAFTA renegotiations (and already have) which could fundamentally alter the nature of North American trade. North American businesses will also have to grapple with the changes likely to be forced on their supply chains and customer bases, including for Canadian and Mexican businesses, a potential for steel and aluminum from non-U.S. exporters suddenly foreclosed from the U.S. market.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions