Pilot PMR People

Trade War Goes Beyond Steel and Aluminum Prices

By   |  

Relations between Canada and the United States can be equated to one that exists between siblings. Sometimes we are united in our front to further establish North America as a superpower in our economy, trade, and international impact. Other times, however, we bicker and enter into a relationship where individualistic mindsets and greed replace common sense and decency. While it remains true that we maintain good relations in comparison to other countries, a growing trade war is challenging the friendship that we have worked so hard to cultivate over the years.
Canadians have been bombarded by news reports regarding the United State's Government's decision to enact tariffs on Canadian steel and aluminum; increasing the cost to import steel by 25% and aluminum by 10%. While it is believed that these increases in import taxes will be removed when negotiations of the North American Free Trade Agreement have been concluded, Canadians are projecting the damage that may take place to the Canadian economy and workforce, if these tariffs remain in place.
How Will Steel Tariffs Affect Canada?
Canada prides itself on its contributions to the production of steel and aluminum. Steel production currently employees approximately twenty-two thousand Canadians, while aluminum production employs just over eight thousand people. What many do not realize, however, is that 90% of Canadian steel is exported to the United States, as they rely heavily on this import to fill their steel-related needs. Although aluminum imports are not as significant when compared to steel imports, 84% is exported to the United States. In 2017 alone, Canada shipped 24.1 billion dollars worth of steel and aluminum south of the border.
It comes as no surprise then that steel and aluminum prices are increasing, and jobs within this sector are decreasing, to compensate for these tariffs. As the United States makes moves to begin to rely on infrastructure already in place within their own borders, Hamilton, Ontario, affectionately known as “Steel City” is already feeling the effects of the tariffs. Approximately 10,000 individuals work within the steel industry, and roughly 30,000 jobs are directly tied to this sector in this one Canadian city alone. The Canadian Government is working to provide a compensation program for employees who will be impacted by these tariffs, as Canada works to smooth the chasm that these import taxes are creating.
Canada’s Retaliation Hits Home
In a report released by the Peterson Institute for International Economics (PIIE), Canada is expected to lose 3.2 billion dollars per year. In an effort to counteract these new tariffs, Canadians are being encouraged to ‘buy local,’ and will benefit in doing so as Canada is retaliating by enacting import taxes on 16.6 billion dollars worth of goods currently imported from the United States. Items such as toilet paper, chocolate, coffee, pens, bedding, washers and dryers, ketchup, insecticides and fungicides, playing cards, and so forth have made it to the list, meaning that Canadians will either have to pay more for specific brands of these items or change their purchasing habits and buy from Canadian companies.
China has already enacted import taxes to items that they currently import from the United States, as their form of retaliation to the tariffs placed on Chinese steel and aluminum. The list of 128 products and goods, which include pork, nuts, fruit, and wine, have been taxed resulting in approximately 3 billion dollars in additional import fees. These tariffs have already impacted farmers' profits throughout the United States. As U.S. farmer’s look to this year’s harvest, they are hoping that the trade war will end quickly but that positive conclusions will also come from this strategic move made by the U.S. Government.
Does the Trucking Industry Need to Pivot?
To say that 2018 has been a year of change for the trucking industry would be an understatement. From the implementation of the ELD Mandate and the growing presence of blockchain technology to the driver shortage that both Canada and the United States are currently facing, steel tariffs have added another ingredient to the mix.  While the industry has witnessed both positive and negative changes, it is still holding steady and remains to be the primary way in which goods are transported across North America. Now as import taxes increase and the demand across the border decreases, trucking companies may be looking to pivot their resources and focus primarily on shipping products and goods domestically. While all trade with the United States is not coming to a standstill, by concentrating on domestic shipping solutions, both the United States and Canada can strengthen trade within their borders and provide new manufacturers with the shipping solutions they need as demand increases. The United States has already stated that the production of aluminum and steel will grow within their country, and Canadians are expecting to pay for Canadian-made products versus imports, increasing the need for shipping of these goods and resources.
Chuck Snow, President, and CEO of TRAFFIX believes that the trucking industry is in uncharted waters. Import tariffs on aluminum and steel, not to mention a trade war between the world’s superpowers, came as a surprise to many. Tariffs have directly hit cross-border steel haulers who have built a business serving the steel industry, but fortunately, with the shortage of drivers, especially flatbed drivers, there is enough work to keep these trucks and drivers busy. According to a DAT trend lines report, however, the demand for flatbed trucks has fallen consecutively for the past four weeks, from 109 loads per truck in early June, to 52.9 loads per trucks of the middle of July. Chuck believes that while the mandatory use of ELD’s was a giant positive disrupter for the industry especially the flatbed sector, the industry is unsure of where the chips are going to fall next with this disruption to the import and export of goods.
What started out as way to encourage steel and aluminum production in the United States, is turning into a trade war that can impact every sector of the North American economy. As we navigate these changes and wait patiently to see how these tariffs will impact the industry, the trucking industry is going to continue to do what it does best; transport products and goods and keep businesses in business.