Lessons from the United States 2018/2019 steel and aluminum tariffs

It will take some time to determine the full impact of the US tariffs on the Canadian economy in 2025. Nevertheless, insight into the impacts of the new tariffs can be gained by examining the effects of tariffs in the recent past. A new study examines how Canadian steel and aluminum producers adjusted to 25% tariffs on steel and 10% tariffs on aluminum imposed by the United States from June 2018 to May 2019.

Over the 11 months that tariffs were imposed, from June 2018 to May 2019, the value and volume of tariffed steel and aluminum exports to the United States fell by about half relative to steel and aluminum products that were not tariffed. However, on average, prices of Canadian aluminum and steel exports did not fall to compensate for higher tariffs. US importers were estimated to pay the full cost of tariffs through higher prices.

From 2017 to 2019, Canada's exports of steel (-8.2%) and aluminum (-15.9%) to the United States declined across the cohort of steel and aluminum producers that exported to the United States in 2017 and were subsequently tariffed. These declines were more muted than those of the monthly export values, in part because the annual figures include some of the recovery in exports in the latter half of 2019.

Steel exports declined from 2017 to 2019 mainly because tariffed steel producers exited the US market altogether and halted operations. In contrast, tariffed aluminum exporters adjusted by reducing their exports, rather than severing supply chains by exiting the US market.

For the same cohort of tariffed steel and aluminum exporters, gross output and employment levels were maintained or grew from 2017 to 2019. Moreover, tariffed steel and aluminum producers that continued to export to the United States increased their investments by about 60%, which outpaced the investment growth of firms that exited the US market.

Lastly, firms that left the US market from 2017 to 2019 tended to have higher debt levels than firms that continued to export, suggesting a link between the health of balance sheets and firms' ability to continue as exporters.

With higher tariffs, declining trade is expected. The resilience of tariffed steel and aluminum exporters may be more difficult to replicate in the face of today's higher, more uncertain and potentially more persistent tariffs.

The study, "Lessons from Canadian exporters during the U.S. 2018/2019 steel and aluminum tariffs," was released today in the November issue of Economic and Social Reports. For information on other releases in this issue, please see the Daily release "Economic and Social Reports, November 2025."