How will Canada’s steel industry stack up against Trump’s new ‘Buy American’ quota?

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WATCH: Canadian steel industry nervous about Trump's "Buy America" rules – Jul 16, 2019

Should Canada’s steel industry be gouged again by U.S. trade policies, the federal government would “vigorously defend” its interest.

An official speaking on background confirmed that its defence would include seeking an exemption to Trump’s Buy American policy.

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On Monday, U.S. President Donald Trump signed an executive order that would eventually boost the amount of U.S. components in American-made products from 50 per cent to 75 per cent.

The tightened provisions, which fall under the Buy American Act, would also bring the U.S.-made steel and iron quota to a whopping 95 per cent.

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“We’re standing up for the American worker like our country has never stood up for the worker before,” Trump said during the third annual ‘Made in America’ showcase, a job-securing effort that has been a key part of his re-election campaign.

“Our steel industry is doing very well… Our steel industry was going out of business. If I hadn’t been elected, you would have no steel industry right now. It would be gone.”

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Canada was relieved of a 25 per cent tariff on steel and a 10 per cent tariff on aluminum exported to the U.S. back in May, clearing the path for a new NAFTA and calming trade war tensions.

At the time, the U.S. cited national security and unfairness to the American economy as reasons for the tariffs. This time around, Trump says the provisions are intended to restore the “economic independence” and “industrial might” of the U.S.

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But the move could be another setback for Canada’s manufacturers.

Canada is the biggest supplier of steel and aluminum to the U.S., according to the Canadian Steel Producers Association, with nearly 90 per cent of its steel exported to the U.S.

READ MORE: U.S. to apply tariffs to fabricated steel imports from Mexico

A spokesperson for Foreign Affairs Minister Chrystia Freeland’s office said Canada has “successfully confronted a number of trade threats” and is ready to protect its economic interest, yet again. He noted that Trump’s executive order initiates a consultation process with various steps and isn’t set in stone.

“We will continue to defend our national interest and advocate against any new proposals that would negatively affect jobs and our deeply integrated cross-border supply chains,” Adam Austen told Global News in an email.

“The Canadian federal government intends to closely co-ordinate with Canadian businesses, including the Canadian Manufacturers and Exporters, to advocate on behalf during the forthcoming consultation process.”

Trade Minister Jim Carr said Tuesday he was aware of Trump’s intention and that the government will “be alert to any policies taken by any government that negatively impacts our industries.”

Catherine Cobden, the President of the Canadian Steel Association, said the proposed provisions are “discouraging” and “go against the free and fair trade” crucial for both countries.

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“Canada and U.S. steel markets are highly integrated and both nations benefit from our steel trading relationship,” she said.

“A 95 per cent provision for U.S.-made steel in federal procurement projects fails to recognize this. The previous provisions at 50 per cent were already having a chill effect on our industry.”

But the change, if implemented, won’t be as impactful as it may appear, according to Peter Warrian, a steel expert and researcher at the University of Toronto’s Munk School of Global Affairs.

Warrian pointed to the exclusion of a public procurement clause in NAFTA as a reason.

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“It’s a change without a real difference,” he said. “The NAFTA rules, which are supposed to promote fair and free trade between the two countries, there’s an exemption the Americans put in with respect to procurement… It’s not as bad as you might think for Canada on steel because of the sort of steel for infrastructure projects — bridges and that sort of stuff — they’re outside of NAFTA, so it doesn’t fall under the free trade rules.”

He said the 95 per cent quota is less influential than the continued protectionist attitude from the Trump administration on international trade. While Canada fought hard and succeeded in freeing itself from the previous U.S. tariffs, the section of the U.S. Trade Act that made it possible, where Trump cited national security, is still around and could still be “trouble ahead.”

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“Tariffs are off, but protectionism is back,” he said.

“American protectionism is back in the form of Buy America rules. We had a year where protectionism was in tariffs of steel and aluminum. So the tariffs went away, but it’s back in the strictness of the Buy American stuff.

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He believes the developments are “absolutely a step on the road” to a trade war.

And while the impacts will be felt, Warrian says it will hurt more in the long-term than the short-term.

“When you put all these things together, what happens is companies say, ‘Okay I’m not going to invest in Canada I’m going to invest in the states.'” he said,

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“That’s probably the biggie in the background — what happens to the future of investment?”

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