The renewed trade war between the United States and Canada is adding further uncertainty to the steel and aluminum supply chains that are vital for heavy manufacturing and North America’s automotive industry. The breakdown in trade talks last week led to a rapid escalation of tariffs and counter-tariffs between the two close trading partners, affecting key metals and forcing producers and importers to consider longer-term solutions to the heightened cost uncertainty.

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According to analysts, there will be no clear winner in this escalation, as supply chains are so complex and intertwined that businesses on both sides of the border may face tariffs multiple times because many materials and products cross the border repeatedly. After negotiations collapsed, the U.S. imposed tariffs on $20 billion worth of Canadian goods, including alcohol, hockey sticks, cement, and machinery. Canada responded by announcing counter-tariffs effective September 8, covering sectors such as steel and aluminum, dairy, appliances, agricultural equipment, pulp and paper, and electronics.

Canada’s government stated that existing counter-tariffs on steel and aluminum would increase from 25% to 50% to match U.S. rates, which took effect August 22, and vowed to match the U.S. tariffs dollar for dollar. The re-escalation is putting many businesses in a difficult position as they assess which items in their supply chains will be most affected by the new tariffs.

The U.S. is not necessarily the winner of the tariff war initiated by President Donald Trump, the current President of the United States. Analysts say the initial impact across all sectors will be chaos and a push to prepare for long-term supply chain shifts. Atsi Sheth, chief credit officer at Moody’s Ratings, commented that much more uncertainty can be expected for some time. Sheth noted that while the U.S. steel sector may have a slight advantage over Canada, the highly integrated automotive sector, where materials and parts often cross the border multiple times before final assembly, will suffer on both sides of the border. The Moody’s expert added that tariffs on such an integrated sector do not just impact the country being tariffed but also the country imposing them.

Source: IndexBox Market Intelligence Platform