The billion-dollar carrot: Why Canada won’t buy Trump’s steel relocation offer

A welder works at Walters Group Steel fabrication plant in Hamilton, Ont., Wednesday, July 16, 2025. Photo by Chris Young /The Canadian Press

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WASHINGTON, D.C. — Pay 50 per cent on raw metal shipments — while other industries pay 25 per cent tariffs on the full price of finished goods containing those metals — or move production.

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That’s the message this month from the United States to Canadian steel and aluminum producers and their downstream supply chains. 

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Since last year, Canadian steel exporters to the United States have faced 50 per cent Section 232 tariffs, a significant increase from the initial levels introduced by U.S. President Donald Trump in 2018. Early this month, Trump restructured those duties to apply to the full customs value of finished goods rather than just the raw metal content, effectively spreading the burden to vehicle makers and other manufacturers.

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Then, late last week, the White House offered a carrot: It declared that Canadian steel and aluminum makers could enjoy tariff relief if they did one thing: move to America.

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“The U.S. is saying, ‘OK, here’s short-term relief,’ but if you’re an employee at a steel mill in Canada, this is not any sort of positive news,” said Clark Packard, a research fellow at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies in Washington, DC.

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“It’s almost like a Pyrrhic victory,” he said, noting how it reflects “Trump’s zero-sum mindset about trade relations: The U.S. can’t win unless somebody else loses.”

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And Canadian steel has indeed been losing, signalled by lost revenue and layoffs.

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Algoma Steel, based in Sault Ste. Marie, Ontario, saw revenue drop 16 per cent last year, compared to 2024, and it reported a $365 million net loss in the final quarter of 2025. In December, citing tariffs and its transition from electric arc furnace production, the firm announced layoffs of about 1,000 employees.

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A year earlier, shortly after Trump’s tariffs were introduced, Canada Metal Processing Group laid off 140 workers in Ontario and Quebec, and ArcelorMittal made staff cuts that same month.

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Canadian steel production fell four per cent in the first 11 months of 2025 compared to the year before, according to World Steel Association data, and the full year saw an overall contraction of two per cent. 

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So are any Canadian firms likely to jump at Trump’s tariff-relief offer and move to the U.S.? Not unless they enjoy making risky bets, say trade watchers.

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First of all, U.S. steel production is up, which, according to Jason Miller, a supply chain management professor at Michigan State University, means adding Canadian capacity risks saturating the market and impacting prices.

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According to the American Iron and Steel Institute (AISI), adjusted year-to-date production as of this week was 29,549,000 net tons, at a capability utilization rate of 77.8 per cent, up 6 per cent from the year before. Trump has set a target of 80 per cent — a rate he deems critical for national security — so the U.S. market is already close to that mark.

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Employment in the U.S. steel industry, however, has dropped significantly in recent decades, owing to technological advances. The figures have hovered between 80,000 and 86,000 employees for the last few years, but that’s 100,000 jobs fewer than the industry had in 1990. So added capacity and production does not necessarily mean more jobs.