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The production line operates at ArcelorMittal Dofasco in Hamilton on Oct. 13, 2022.Nathan Denette/The Canadian Press

Canada’s steel and aluminum industries range between cautious optimism and uncertainty in their preparation for the return of Donald Trump as U.S. president, as his vow to increase tariffs across the board in his second term raises the possibility of a new trade war.

Mr. Trump, who won the White House after Tuesday’s vote, floated during his campaign the idea of imposing a minimum 10-per-cent global tariff on all goods coming into the United States. While many economists say tariffs drive inflation, Mr. Trump believes they are a net positive for the U.S. economy, helping to create domestic manufacturing jobs and boosting economic security. In September, he called tariffs “the greatest thing ever invented.”

In 2018, during his first term as president, Mr. Trump imposed 25-per-cent tariffs on imports of Canadian steel and 10 per cent on aluminum. Canada responded with its own retaliatory tariffs on the U.S. The trade war died down in 2019 when Washington agreed to remove the tariffs. But in the summer of 2020, the Trump administration reinstated tariffs on certain Canadian aluminum products, before agreeing to drop them a few months later.

Mr. Trump also used tariffs as a negotiating tactic to win concessions in the United States-Mexico-Canada Agreement, or USMCA, which replaced the North America free trade agreement and came into effect in 2020.

Canadian billionaire Barry Zekelman, chief executive officer of Chicago-based Zekelman Industries, the largest independent steel pipe and tube manufacturer in North America, said he isn’t expecting a new trade war to flare up in steel because Canada has been abiding by the terms of USMCA, which includes monitoring for disruptive surges in import volumes.

“Canada’s been adhering to the deal,” he said. “There’s been a couple products that have maybe exceeded expectations in volume, and I suppose there would probably be some discussions around that, but I think it’s been a very co-operative, good deal with Canada, and I think both countries are pretty happy.”

Mr. Zekelman thinks Mr. Trump is far more likely to take aim at Mexico, which Mr. Zekelman says is the location of “massive abuse” by some countries that use it as a backdoor entry into the U.S. market to ship in record amounts of steel.

“I think that the incoming administration is going to hammer Mexico,” he said.

Catherine Cobden, CEO of the Canadian Steel Producers Association, said that, while the election of Mr. Trump introduces uncertainty, the domestic steel industry is in a much better position now than during his first term. Trade policies are more integrated stemming from the 2020 USMCA agreement, with both countries working to crack down on unfair trade practices out of countries such as China.

She cited the Canadian tariffs that were imposed this summer on steel products from China that closely mimic what the U.S. already had in place as well as Canada introducing a “country of melt and pour” stipulation on imports that identifies where steel coming into the country originates from.

That policy should prevent China from potentially bypassing tariffs by shipping their steel products to an intermediate country first, and then ultimately to Canada, which disguises the country of origin.

“We have a strong opportunity to demonstrate to the United States that we are their best partner, and frankly we’re very united in the fight against unfair trade,” Ms. Cobden said.

While steel stakeholders are cautiously optimistic a trade war can be averted between the U.S. and Canada, a major player in the aluminum industry isn’t so sure.

Jean Simard, CEO of the Aluminium Association of Canada, said another flareup between Canada and the U.S. is a possibility, as Mr. Trump could well use tariffs as a negotiating tool ahead of 2026, when USMCA is up for review.

“There’s all sorts of scenarios,” he said. “But this creates a dynamic where the U.S. will certainly want to extract concessions from both Mexico and Canada.”

As. Mr. Trump weighs his options, Mr. Simard is also wary of a returning president who appears to be in a much stronger position than during his first term, considering he won not only the electoral college, but also likely the popular vote. In addition, Republicans have control of the Senate, and the Supreme Court is heavily stacked in favour of Republican nominees.

“He is very very powerful, far more than before,” Mr. Simard said.

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