‘There will be an immediate impact:’ Quebec aluminum industry prepares for Trump’s uncharted tariff threat
Posted January 26, 2025 1:31 pm.
Last Updated January 28, 2025 3:29 pm.
With United States president Donald Trump’s tariff threat just days away from possibly coming into effect, Quebec industry experts prepare for an inevitable market shift.
The potential 25 per cent tariff on everything imported to the U.S. from Canada could begin February 1st, following last Thursdays remarks at the World Economic Forum in Davos, Switzerland, where he said the U.S. doesn’t need Canadian oil, gas, lumber – and more.
“We’re going to be demanding respect from other nations,” Trump explained via video conference to an audience of the world’s most powerful business and political leaders. “Canada has been very tough to deal with over the years,” Trump added.
The Canadian and Quebec aluminum industry sector says they are preparing for the inevitable impacts.
“It’s going to affect us because it’s going to have a negative impact on our biggest client, which means consumption will start going down,” said Jean Simard, president & CEO at Aluminium Association of Canada.
If the U.S. were to wean itself off of Canadian exports, it would wound the established trade relationship between the two countries.
“We’re ready to face the situation and you know, at the end of the day, the tariff is born by the consumer, not by the producer, so the full impact will be born by US clients within a matter of days,” said Simard.
“When you put a tariff in one region of the world against other sources of import, the metal will find through time and very quickly, the best way to reach another market that will give it or provide it a better netback.”
A European shift
Quebec produces roughly 90 per cent of Canada’s aluminum, putting Canada as the fourth largest producer of primary aluminum in the world. Quebec is responsible for around 4.4 per cent of total global production. Simard says with this threat, the market could shift abroad.
“You will have through time a shift in logistics where metal will come from further away to come in because it’s not subject to a 25 per cent tariff when it comes in from the Middle East, from the statements that we heard,” he said. “[And] we will avoid a 25 per cent tariff by shifting our products all the way to Europe.”
Aluminum is used for appliances, construction, transportation, and machinery. He says in terms of impact, the U.S. will end up paying more for aluminum, which means an increase that could reach $1,000 a ton more than the current market value.
Simard says currently, Canada produces on a yearly basis 3.2 million metric tons of aluminum, while the U.S. produces roughly over 700,000. He believes the U.S. operates in a market deficit.
Reuters reported, that Trumps tariff threat could reroute metal flows, as some international aluminum producers would likely reroute its Canada-made aluminum to Europe to avoid any potential tariff.
McGill University supply chain management professor Saibal Ray suggests Trump’s tactic could be a bravado move, saying a supply chain reconfiguration is imminent as the industry could have dire consequences.
As an example, he worries that most raw material industries could be deeply damaged.
“It will have impact on all other industries, like in Quebec, there are lots of small towns, which are dependent on let’s say this aluminum plant. The whole town will be impacted, all the truck drivers, the supply chain, logistics, there are huge portion will be impacted, and that will have a very bad impact overall on the economy as the purchasing power of the people goes down,” Ray explained.
“There will be an immediate impact on the companies.”
Simard explained that the U.S. industry described Canada’s aluminum as an ‘existential to our industry’ — something Simard says he was astonished to hear as the impacts will be brought on to them as well.
“The problem in a situation like this is that Americans are very much unaware of what’s facing them, it’s surprising, it’s amazing,” he said. “But if you do a survey today in U.S. businesses and everything, it’s a wait and see mode. The first reflex is, ‘ah, it’s not going to happen’ the second reflex is, well, even if it happens, it’s not going to hurt me,” he said.”
“It’s going to hurt them fast and very strongly.”
Simard says dialogue between Americans must persist in order for mobilization to begin. Simard explained that Quebec is by far the largest producer of aluminum in North America. From a U.S. perspective, this represents 75 per cent of all the aluminum imports coming into the U.S.
“The longer it lasts, the worse it gets, this will impact jobs on this side all over the place,”
Like Ray, Simard worries that an increase in layoffs could happen in both countries across many raw material sectors.
“Within a matter of days, the impact will materialize itself in the value chain and some businesses will have to start laying off people,” Simard explained. “[And] some of them, if it lasts past three, four weeks, some of them will be bankrupt because margins are not that high in many sectors that process aluminum.”
The Canadian government said it would impose retaliatory tariffs of its own on U.S. goods entering Canada, with Quebec Premier François Legault telling reporters last week that the province’s economy could be entering a tough transition period.
Ray believes a supply chain reconfiguration, the process of changing the structure of a supply chain to improve its performance and reduce the risk, has to happen, noting that even if the impact is not severe, Canada needs to think about diversifying its supply chain.
“Canadian supply chains, Canadian manufacturing, there has to be government to do something about manufacturing,” said Ray. “It needs to take very proactive steps to bring manufacturing and the related supply chain and so on back.”
Simard says plans have been made through a council with 50 members across different industrial sectors across Canada to analyze logistics and the impacts. He and Ray encourage politicians and the public to come together and have a common ‘united’ front amid this potential crisis, giving a reminder that both countries could suffer.
“If you know someone in the U.S. reach out, tell them it’s going to be bad for all of us, but mostly it’s going to impact them very early on and it’s going to be a devastating impact. We have to wake up to this.”
Simard remains cognizant of the outcomes, reminding that he and many other industries have experienced this threat during Trump’s first term in 2016 when they received a 10 per cent tariff on aluminum.
“This relationship has to stand the test of this chaos, of this crisis,” Simard said. “Because at the end of the day, it’s going to remain our market after that.”
