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Steel, aluminum industries blast Trump tariffs as Canada hits back with US tax

Outside the U.S., reactions to aluminum and steel tariffs against Canada, the European Union and Mexico were blistering as industry called the move counterproductive and governments announced plans to hit back.

Starting June 1, the U.S. will slap a 10% tariff on aluminum and a 25% tariff on steel imports from Canada, the EU and Mexico. The trio of countries had been temporarily excluded from the tariff, rolled out in March, amid negotiations with the U.S. government.

Many in the aluminum and steel industries lambasted the tariffs as hurtful and unnecessary. The Aluminum Association of Canada said that aluminum customers would suffer with higher prices under the tariffs that would knock back the competitiveness of North America's aluminum industry. Neither the U.S. nor Canada would win in a trade war, Jean Simard, president and CEO of the Aluminum Association of Canada, told S&P Global Market Intelligence.

"It's like the middle ages," Simard said. "It's ridiculous."

The Aluminum Association said the tariffs would have a negative impact on North America's integrated aluminum sector. Simard said it was too soon to tell if the countermeasures announced May 31 by Canada would help offset the tariffs. "We want to make sure we're not shooting ourselves in the foot," he said.

Canada stands to suffer most under the tariff regime, as both the top U.S. import source of steel and aluminum. Canada, on average, accounted for 56% of U.S. imports of aluminum between 2013 and 2016, according to the United States Geological Survey. And among the top 10 U.S. import sources of steel in 2017, Canada accounted for 17% of the trade or 5.8 million tonnes, the U.S. Department of Commerce calculated in a recent report. Mexico is also in the top 10 in terms of steel, accounting for 9% or 3.2 million tonnes.

Jim Beck, a spokesperson for Alcoa Corp., a large aluminum producer with operations in Canada, criticized the tariffs and described their target as misplaced. "The Administration's decision to apply tariffs on vital trading partners, including Canada, is unfortunate and does not address Chinese overcapacity," Beck said in a statement emailed to S&P Global. "Alcoa asks the U.S. government to remove tariffs from fair-trading partners and work with its allies to address Chinese overcapacity, the root cause of the aluminum industry's challenges."

Across the Atlantic, German Steel Federation President Hans Jürgen Kerkhoff condemned the move, calling on the EU to implement safeguard measures shielding steel firms from a diversion of trade flows that will see an increase of steel exports targeting the European market.

"We need a decision by the World Trade Organization as soon as possible," Kerkhoff said in a statement. "Additionally, the political landscape should continue to strive for a permanent exception of European steel firms."

In the U.S., imposition of the tariffs has resulted in contrasting reactions. Some manufacturers that depend on metals oppose Trump's protectionism, arguing it hurts their sectors.

Beer Institute President and CEO Jim McGreevy said the tariffs amounted to a US$347 million tax on the country's beer industry. "Over the long run, these tariffs will drive aluminum prices higher globally, increasing the cost of beer production for all brewers," he said in a statement. "The tariffs are already having an immediate and disproportionate impact on American brewers and American jobs."

End users of steel, such as the American Wire Producers Association, have leveled similar criticisms, saying tariffs would decrease the competitiveness of U.S. manufacturers by increasing prices of raw materials on which they depend.

But steel and aluminum producers in the U.S. have cheered on Trump's push to boost their industries. The Steel Manufacturers Association has said tariffs would strengthen U.S. steel producers. "For too long, U.S. producers have faced a relentless inflow of imports due to global excess capacity created by foreign government subsidies and unfair practices," Philip Bell, president of the Steel Manufacturers Association, said when the tariffs were announced in March. He could not immediately be reached for comment May 31.

Meanwhile Canada, Mexico and the EU began to announce or discuss planned countermeasures. Mexico said it would impose equivalent measures on a range of products including flat steel, while the EU and Canada promised to retaliate, with the latter announcing C$16.6 billion in countermeasures starting July 1.

Canada's Prime Minister Justin Trudeau called the imposition of tariffs "totally unacceptable" during a May 31 press conference and Foreign Affairs Minister Chrystia Freeland said there would be two lists of products with one containing steel products taxed at 25% and the other with aluminum and other products at 10%.