Canada’s tariff and trade position clarified. Part 2.

Preferential tariff treatment versus competitors is a must

Let’s look deeper at why a 25% tariff would be a win for Canada.

To be clear, our statement above about competitive advantage needs to be embedded in ANY deal for Canada. Canada is still striving for full exemption from the 50% tariffs. It might settle for 10%, which would give it the same rate as its crude oil and potash exports to the U.S.

If Canada eventually settled for 25%, it would only accept this provided it was assured its competitors would remain at 50%. A core condition of Canada’s negotiating stance is it always enjoy preferential treatment versus all competing importers to the U.S.

Canada’s opposition to trade quotas remains steadfast

Jean Simard, president of the Aluminum Association of Canada, captured the Canadian posture on quotas in an opinion piece published Aug. 18. Simard allowed AMU to summarize some of his key arguments here:

• While TRQs may seem politically convenient, they are far from a one-size-fits-all solution. For the U.S., they may look like a tool to protect domestic industry, but in reality, they would cap a reliable supply source, increase volatility, and push buyers toward higher-cost, less secure alternatives.
• Canada’s aluminum sector is a strategic, critical-mineral industry, which the U.S. has relied upon for over a century. TRQs would undermine its stability and leverage.
• U.S. smelting capacity has collapsed—from 22 plants four decades ago to just four operating at half capacity—thanks to energy deregulation in the 1980s and China’s non-market practices. In today’s AI-driven economy, the main competition for U.S. smelting isn’t China or Canada, it is data centers willing to pay far more for electricity than smelters can afford.
• The logical U.S. strategy is to keep importing clean, reliable Canadian aluminum and free up its own power grid for other high-value industries.

Neither tariffs nor TRQs make sense

• I wish we were in a world where we did not have to debate the advantages or disadvantages of tariffs vs. TRQs. Neither is desirable, nor makes sense given our North American aluminum market dynamic.
• Luckily and unfortunately for the U.S. market, Canadian producers can sell to global markets, pressuring the U.S. to remain competitive in pricing if it wants that supply back.

TRQs are the wrong fit for aluminum

Pointing to the TRQs agreed in EU, UK, or Japan trade deals is misleading. Those regions’ combined aluminum exports to the U.S. are negligible:

• Japan produces no primary aluminum.
• The UK exports none to the U.S.
• The EU sends at most 175,000 tons annually, equal to just three weeks of Canadian shipments.
• In those contexts, TRQs are symbolic. For Canada and the United States, they would be economically damaging.

Why Canada must reject quotas

Canada has no reason to accept quotas of any kind. If, as some have suggested, leaders like Donald Trump are more swayed by visible, immediate losses than by promises of future gains, then the sudden absence of Canadian aluminum will speak louder than any concession.

Canadian aluminum underpins the U.S. aluminum industry. One Canadian worker supports 13 U.S. workers in the sector. Handing over future growth potential on a silver platter would be a strategic blunder.

Why it matters

Canada has been steadfast in saying it would not make a bad deal just to make a deal. The above argument from Simard summarizes Canada’s fundamental opposition to trade quotas as part of any deal.

There is also alignment that Canada come out of any deal with a unique competitive advantage on tariffs. This rewards Canada for its longstanding position as the leading supplier to the U.S.

Preferential tariff treatment and unfettered trade access to U.S. markets comprise key element of a good deal for Canada. A good deal is critical for Canada to ensure both sustaining and growth capital is invested in the industry to preserve Canada’s leading role in supplying the U.S.