The Canadian federal government announced on Thursday that it will adjust its retaliatory tariffs on U.S. steel and aluminum products starting July 21, 2025, a move directly tied to the progress of intense trade negotiations with the Trump administration. The adjustment is part of a multi-pronged strategy to protect Canadian industries from what Ottawa has termed “unjust and unprovoked American tariffs” and comes as both nations work towards a new economic and security agreement within a tight 30-day timeline.
A Four-Pronged Strategy to Protect Canadian Industry
In response to the escalating U.S. tariffs, which were doubled to 50% on June 4, the Canadian government has outlined a comprehensive defensive strategy. First, the existing counter-tariffs on U.S. steel and aluminum will be adjusted on July 21, with the level of adjustment contingent on the outcome of the ongoing talks, creating a flexible response mechanism.
Second, effective June 30, Ottawa will implement reciprocal procurement policies, limiting access to federal contracts to suppliers from Canada and reliable trading partners that offer similar access. Third, to prevent trade diversion and stabilize the domestic market, Canada will establish new tariff-rate quotas on steel imports from countries without free trade agreements, set at 100% of 2024 levels. Fourth, the government will adopt additional measures to address global overcapacity, applying rules based on the “country of melt and pour” for steel and “country of smelt and cast” for aluminum to ensure origin accuracy.
High-Stakes Negotiations Amid Escalating U.S. Tariffs
The current trade dispute is an intensification of the Section 232 tariffs first imposed by the Trump administration in 2018 on national security grounds. The 2025 tariffs, however, are considered more severe, with the rate on both metals rising to 50% and the elimination of previous exemptions and “alternative arrangements.” The new measures also apply to downstream products made of steel and aluminum, widening their impact on integrated supply chains.
Following a meeting at the G7 summit, Canadian Prime Minister Mark Carney and U.S. President Donald Trump committed to pursuing a new economic and security agreement within 30 days.
Economic Impact and Market Response
The tariffs have injected significant uncertainty into the North American manufacturing sector. Canadian steel and aluminum producers, who are the largest foreign suppliers to the U.S. market, have reported contract cancellations and disruptions. The economic impact of the 2018 tariffs showed a significant drop in the value of Canadian metal exports to the U.S.
However, some economic analyses suggest that much of the cost of such tariffs is ultimately borne by U.S. purchasers through higher prices, which can limit the direct negative impact on Canadian producers but still disrupts supply chains. Industry stakeholders on both sides of the border have emphasized the need for a swift resolution, as the highly integrated nature of North American manufacturing means tariffs create inefficiencies and raise costs for producers in both countries.
Steel and Aluminum Market Overview
The Canadian and U.S. steel and aluminum industries are deeply intertwined, particularly within the automotive and advanced manufacturing sectors. Canada is the largest supplier of both metals to the United States. The tariffs disrupt this highly efficient cross-border flow of raw materials and finished goods, which has been optimized over decades. The dispute forces companies to navigate complex rules of origin and contend with price volatility, impacting investment decisions and long-term planning across the entire North American industrial base.
