When Donald Trump announced tariffs on steel and aluminum imports on Thursday, it was a happy moment at Atlas Tube Canada in Oak Bluff, Man., and Harrow, Ont.
That's because they're part of the Zekelman Industries Inc. empire, whose chairman and chief executive officer, Barry Zekelman, promised $1,000 bonuses to employees at those two plants and all 13 of the company's U.S. operations when the tariffs take effect.
Mr. Zekelman doesn't make raw steel or sell it, but buys about US$1.5-billion worth of the metal every year.
"I'm a buyer of this product and I want the price to go up," Mr. Zekelman said.
While most of his company's steel is sourced from American mills, many of his competitors in the tube steel business, who buy foreign steel, will face much higher costs.
He is in the thick of a battle that has raged in global steel markets for decades – how to eliminate the glut of steel making capacity and keep prices at levels that generate profit.
That battle roared into a higher tempo this week when a populist president who believes foreign countries are destroying American manufacturing decided that levies of 25 per cent on steel coming into the United States are the way to Make Steel Great Again.
The economic target, rhetorically at least, is China, although the tariff will be slapped on imports from all countries except Canada and Mexico – for the moment.
On the list of the top 10 countries that shipped steel into the United States last year, China was No. 10. Canada's shipments of six million tonnes ranked first.
By taking this path, Mr. Trump endorsed the arguments of U.S. steel makers, the United Steel Workers (USW) union, Mr. Zekelman and others that the U.S. steel industry is in peril because of subsidized Chinese steel dumped into the United States – either directly or in products shipped from other countries – and that the dumping has kept steel prices artificially low.
But he also has a political target in the form of voters in Pennsylvania, West Virginia, Ohio and Indiana, states that carried Mr. Trump over the top in 2016, in part because of mill closings and years of job losses.
Whether his actions will restore steel industry jobs and boost company profits or do more harm than good to the U.S. economy by sparking a global trade war will be hotly debated as the impact of the tariffs unfolds.
The economic theory behind the tariffs is that they will send the prices of imported steel and aluminum so high that U.S. manufacturers now buying those metals offshore will be forced to buy them from U.S. mills instead. That will increase jobs and resurrect closed mills.
Steel rolls are prepared to be cut.
Indeed, United States Steel Corp. announced on Wednesday that because of the tariffs it will recall 500 employees, restart a blast furnace shut since 2015 and begin making steel again at its mill in Granite City, Ill., a state that voted against Mr. Trump.
The counterpoint to the argument that the U.S. economy will benefit as domestic steel jobs return is that end users of the metal such as car makers, appliance manufacturers and oil and gas companies will face higher costs and be forced to lay off employees. In at least one analysis, the number of jobs eliminated by companies that use steel will far exceed the jobs created in the steel industry itself.
The tariffs will benefit the construction equipment business of Guelph, Ont.-based auto parts and equipment manufacturer Linamar Corp., in a way that hurts the United States, the company's chief executive officer Linda Hasenfratz said this week.
Linamar's Skyjack business uses Canadian steel, so it will have an advantage over U.S. competitors that will face price increases on U.S. steel as the tariff causes prices of domestic steel to rise also.
"What the President is doing is disadvantaging his own manufacturing companies," Ms. Hasenfratz said. "It's almost [incentivizing] you to manufacture outside of the United States and buy your raw materials outside of the United States."
The Washington-based Council on Foreign Relations said its analysis of the steel tariff and the 10-per-cent levy on imported aluminum shows they will wipe out an estimated 40,000 auto industry jobs.
Mr. Zekelman, who thinks a strong U.S. steel industry is essential, said those concerns are overblown and consumers can easily absorb the impact of higher steel prices.
Low prices have "become like crack cocaine to them," he said.
He points to heavy-equipment maker Caterpillar Inc., noting that if the cost of a tonne of steel goes up US$300, the price of a US$1-million D9 bulldozer will rise about US$7,500.
"If you're telling me that Caterpillar doesn't have three-quarters-of-a-per-cent pricing power to absorb that, that's crazy."
Canada should join hands with Mr. Trump, he said, by blocking cheap offshore imports so they don't find their way into the U.S. market.
Zekelman Industries imports about 5 per cent of the 2.5 million tonnes of steel it uses annually to make tube for customers in transportation, non-residential construction and the energy sector.
Although the lobbying for tariffs has been intense, this is not the worst of times for U.S. steel companies.
Prices for benchmark hot rolled steel in the U.S. market hit US$760 a tonne last month, almost double the low of US$389 in May, 2009, during the Great Recession. That is, however, off the high of US$880 a ton reached in 2011.
Nucor Corp., the largest U.S. steel maker, reported profit of US$1.7-billion in 2017, a 35-per-cent improvement on 2016. United States Steel Corp. swung to a profit of US$387-million from a loss of US$440-million.
Employment numbers, however, help explain why the tariffs could be key for Mr. Trump in 2020 in the Rust Belt.
The number of jobs in primary metals stood at 376,500 in January, compared with 625,700 in 2000, two years before then-president George W. Bush targeted South Korea and Brazil with tariffs in an earlier instalment of steel trade wars, according to the U.S. Bureau of Labor Statistics.
A similar downsizing has affected mills in Canada. The industry employed 22,500 people in Canada in 2016, down from 39,210 in 2001, according to the most recent Statistics Canada data.
Steel makers in Canada dodged a bullet with the announcement that steel imports from this country and Mexico will be excluded from the levies, pending what Mr. Trump and his administration consider fair and successful renegotiation of the North American free-trade agreement.
It was NAFTA that ended years of cross-border Canada-U.S. steel battles that were similar to softwood lumber and the more recent sparring over subsidies for Bombardier Inc.
The prospect of the Canada-U.S. steel-tariff battles of the 1970s and 80s returning is like "the night of the living dead – they're back," said veteran Canadian steel industry observer Peter Warrian, a senior research fellow at the University of Toronto's Munk School of Global Affairs.
Even though NAFTA, which went into effect on Jan. 1, 1994, ushered in trade peace, it did nothing to alleviate the roller-coaster existence of Canada's steel industry. The early 2000s were marked by the collapse of two of Canada's largest steel makers into protection under the Companies' Creditors Arrangement Act, with cheap offshore imports and a resulting drop in prices taking some of the blame.
But when Algoma Steel Inc. and Stelco Inc. came out from under creditor protection they emerged at what was a brief golden time to be a shareholder in a Canadian steel company.
In the mid-2000s, all four of Canada's largest steel makers, Algoma, Stelco, Dofasco Inc., and Ipsco Inc. got swept up by foreign-owned companies paying massive premiums in a global consolidation of the industry.
A decade later, Algoma and Stelco plunged back into protection, again amid low prices in the U.S. market. Stelco shook off the CCAA shackles last year, is now owned by a New York investment fund and is gearing up to try to win back contracts with auto makers that were stripped from it when it was a unit of U.S. Steel.
Algoma is still operating under CCAA, with its debtholders prepared to take over the company as they negotiate with the USW on new labour contracts.
Dofasco, now part of ArcelorMittal, the world's largest steel maker and Regina-based Ipsco, part of London-based Evraz PLC, which is owned by Russian tycoons, appear healthy.
Mike Day, president of USW local 5890, which represents workers at the Evraz mill in Regina, said membership in the unit is up to its highest level yet at about 1,000 people, with the recent hiring of 120 people to make steel for pipelines and other projects.
Steel tubes are manufactured at Atlas Tube in Harrow, Ont., on March 8, 2018.
Algoma, ArcelorMittalDofasco, Evraz North America and Stelco all refused requests by The Globe and Mail to interview their chief executive officers.
While the reprieve from tariffs should protect the companies' critical U.S. market, there is a danger that overseas steel destined for the U.S. market will be diverted here and become a new competitive threat. What might be a bigger danger, however, is that Canada becomes a back door into the United States for steel that gets priced out of that market.
"Canada needs to take a very, very strong stand against circumvention," said Leo Gerard, president of the USW.
Mr. Gerard backed the argument by U.S. steel companies and Mr. Trump that a strong steel industry is essential to national security. The national security provision of a 1962 law is what permits the U.S. government to put the tariffs in place.
The transformation of steel into other products raises concern that the tariff can be avoided and thus won't be effective.
Steel, unlike say, bourbon or cheese, is not a single-use product and is critical throughout the manufacturing economy, noted Laurence Ales, an economics professor at Carnegie Mellon University in Pittsburgh.
"Downstream producers might start importing not steel from abroad, but nuts and bolts from abroad," Prof. Ales said.
Proponents of protecting steel to maintain national security argued in part this week that steel made in the United States specifically for submarines makes those vessels the strongest in the world.
That doesn't wash with Anson Soderbery, a professor at Purdue University in Indiana.
"If you're making an argument about national security and the production of submarines, then subsidize U.S. steel production that's destined for submarines," said Prof. Soderbery, whose specialty is international trade.
"That doesn't distort the rest of the economy, it doesn't lead to any inefficiencies," he said, disputing the argument that national security is the real goal of the tariffs.
"The goal is to broadly protect one particular industry that happens to carry with it a lot of voting power."