President Donald Trump hit foreign steel and aluminum makers across the globe with a 25% tariff, echoing a similar move in his first term. The move came on the heels of the series of executive orders he signed on February 1, imposing massive tariffs on all goods from the United States’ three largest trading partners, Canada, China, and Mexico.
Those tariffs – which were set to take effect at 12:01 a.m. EST on last Tuesday and address, according to the executive order, “an emergency situation” under the International Emergency Economic Powers Act, namely “the extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl” – could have disrupted multiple industries in unpredicted ways. However, the White House had no sooner come within spitting distance of the time that the tariffs would have gone into effect on Monday than the Trump administration announced a 30-day pause on tariffs that were to be placed on Canadian and Mexican goods.
The tariffs on foreign metal pleased domestic steelmakers, who have argued that they are struggling against an incandescent flood of cheap foreign metals. Among the less pleased will be Canada and Mexico, which supply the bulk of U.S. metal imports. These tariffs are just as likely to incite retaliation on U.S. exports as were the first round of tariffs.
Once the first batch of tariffs go into effect, if indeed they ever do, all goods imported from Canada and Mexico will be subject to a 25% tariff, except for a 10% tariff on Canadian energy goods, while as of Tuesday there will be a 10% tariff placed on all Chinese goods.
For the sake of argument, let’s say that the 30-day pause passes and the original tariffs against Canada and Mexico also go into effect. This is what we may see.
The mineral processing industry in Canada, the products of which will be subject to the 25% tariff, will be one of the sectors most exposed to disruption from the sweeping tariffs, according to economists at S&P Global.
Canada is the only Western Hemisphere nation that possesses an abundance of cobalt, graphite, lithium and nickel, minerals that are required for the production of batteries for electric vehicles. In addition, Canada is the world“s second-largest producer of niobium, a metal used in aerospace manufacturing, and the fourth-largest producer of indium, an essential material for the production of semiconductors and most EVs.
Its wealth of raw materials places Canada in a unique position atop the global EV battery supply chain.
Meanwhile, the United States, in order to move forward with its green transition despite setbacks in the early days of the second Trump administration, must secure an ever-increasing supply of the critical minerals that are abundant in its neighbor to the north.
“Over the past decade, China has come to dominate this critical industry,” the Carnegie Endowment for Peace said in a 2024 white paper on the topic. “Across every stage of the value chain for current-generation lithium-ion battery technologies, from mineral extraction and processing to battery manufacturing, China’s share of the global market is 70–90 percent,” which is a problematic state of affairs given current Sino-U.S. relations.
This is why many in the Biden administration saw Canada as an appealing alternative source of these critical minerals, although it appears that the Trump administration does not share its predecessor’s enthusiasm for this state of affairs.
Canada also has 50 smelters or refiners for rare minerals, known as SORs, the high-quality output of which is integral to sustainable manufacturing. The benefits of obtaining battery-grade materials from Canada also include shorter, traceable routes to markets.
It is important to note that the effect of the new tariffs is not limited to the items mentioned above.
The executive orders also suspended the three countries’ access to the Section 321 customs de minimis entry process,which had exempted shipments with values of less than $800 – typically e-commerce shipments, many of which originated from Chinese companies such as Alibaba, JD, Shein and Temu – from the tariffs.
Along with creating higher prices for rare minerals used in the production of EV batteries, the tariffs are expected to affect new automobile prices and the price of automotive parts, as well as disrupting supply chains related to vehicle assemblyin the United States. This, in turn, has the potential to lead to significant job losses for American workers. Then there’s the damage to the U.S. export market for goods popular in Canada and in Mexico, as the Canadian government has already signaled it will likely increase tariffs on orange juice from Florida, whiskey from Tennessee, and peanut butter from Kentucky, further roiling the U.S. economy and putting workers in those industries at risk. Mexico’s president, Claudia Sheinbaum, has said that her country will also respond with retaliatory tariffs.
“If the United States moves ahead, Canada’s ready with a forceful and immediate response,” Canadian Prime Minister Justin Trudeau said in a social media post in January.
The responses themselves may be problematic for all sides, although the effects of the international responses should not exceed those of the original tariffs that precipitated them.
Trump’s executive orders included a variety of poison pill that is intended to limit the ability of Canada and Mexico, as well as China, to fight back: Should a country retaliate against these new tariffs by imposing their own or taking other measures, the United States would then ramp up its tariffs further, according to a clause in the order. However, the reality of the situation was that when Canada and Mexico did in fact strike back, the United States put its tariffs on pause for 30 days.
Regardless of how this plays out, any new tariffs, as well as the threat of additional tariffs will likely result in price hikes for all kinds of goods for Americans, as well as for the citizens of Canada, China, and Mexico, among other nations.
This author believes that such aggressive policies are, at a minimum, a bad idea, as they are responsible for increasing consumer costs, spiking inflation, creating unemployment by killing jobs, raising interest rates and, finally, reducing economic growth as measured in GDP.
(Photos: Accura Media Group)
