Total exports of unwrought aluminum fell in June after Donald Trump doubled the tariff on the metal to 50 per cent that month.Evan Buhler/Reuters
Aluminum and steel products incurred nearly two-thirds of all U.S. duties on imports from Canada in June, reflecting the concentrated pain being inflicted on a handful of industries by President Donald Trump’s tariff onslaught.
But while economists warn Canada’s weak exports are expected to sharply slow growth in the second quarter, the latest trade numbers reinforce how the United States-Mexico-Canada Agreement continues to shield this country from the worst of Mr. Trump’s trade wars.
Canada’s merchandise trade deficit with the world widened to $5.9-billion in June, which was up from $5.5-billion in May and the second-highest deficit on record after reaching $7.6-billion in April, according to new numbers released Tuesday by Statistics Canada.
While exports from Canada to the U.S. actually increased in June by 3.1 per cent from the month before, owing largely to higher prices for oil, exports plunged 12.5 per cent from the same month in 2024.
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The deepest wounds were felt by a select group of industries hit hard by Mr. Trump’s sectoral tariffs, which he imposed on autos, steel and aluminum under Section 232 of the U.S. Trade Expansion Act of 1962.
Total exports of unwrought aluminum and iron and steel products both fell in June by more than 11 per cent, after Mr. Trump doubled the tariff on steel and aluminum to 50 per cent that month.
Meanwhile, motor vehicles and parts exports fell 4.2 per cent in June.
In fact, new U.S. trade numbers show a relatively small number of Canadian products accounted for most of the duties the U.S. collected in June.
Aluminum and steel products alone were responsible for just under 60 per cent of the US$710-million in calculated duties collected by Washington, according to a Globe and Mail analysis of U.S. Census Bureau numbers released Tuesday.
“There’s a small share of trade that’s being impacted by tariff hikes and for those sectors it’s significant, but the large majority of goods are crossing the border duty free,” said Nathan Janzen, assistant chief economist with Royal Bank of Canada, in an interview.
Canada is in a relatively enviable position owing to the protection afforded it by the USMCA.
Goods imported under USMCA are exempt from Mr. Trump’s so-called fentanyl tariffs, which he increased last week to 35 per cent after Canada and the U.S. failed to reach a trade deal by his Aug. 1 deadline.
While U.S. trade data showed the share of imports that came in from Canada under USMCA stood at 55.7 per cent in June – down slightly from May but up from 34 per cent in January – the U.S. Census Bureau also reported that 92 per cent of imports from Canada entered the country duty-free, with other trade provisions making up the difference.
The USMCA exemptions don’t apply to the President’s sectoral tariffs on aluminum, steel and autos, though a carve-out exists for the value of U.S. auto parts in Canadian-made vehicles.
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Economists also warn Canada’s low tariff rate is being skewed by shifting trade flows. As U.S. importers cut back on Canadian goods that carry higher duties, that has the effect of lowering Canada’s overall tariff rate.
Still, the Bank of Canada last month estimated Canada’s effective tariff rate at 5 per cent. Mr. Janzen notes the latest U.S. Census Bureau numbers put Canada’s tariff rate at 2.4 per cent – one of the lowest among America’s major trading partners.
The USMCA protection, alongside evidence that the U.S. tariffs are hitting the job market, has shifted the narrative on the Canadian and U.S. economies from earlier this year.
“Whereas before we were worried about having significant economic pain imposed on Canada by the United States, really what we’re worried about now is that the U.S. could impose significant pain on its own economy, and that has negative implications for Canada,” he said.
Mr. Trump’s sector-specific duties are hammering U.S. manufacturers that import many of their parts and raw materials from Canada.
Last week, Ford Motor Co. said it paid US$800-million in tariff costs in the second quarter. It relies heavily on imported aluminum from Quebec to produce the body of its F-150 pickup truck, one of the bestselling vehicles in the U.S.
After Ford’s announcement, U.S. Treasury Secretary Scott Bessent indicated the U.S. was willing to negotiate with Canada on metal tariffs.
That was a welcome development for Canada’s aluminum sector.
“Aluminum markets were able to absorb tariffs at 25 per cent, but not at 50 per cent,” said Jean Simard, chief executive officer of the Aluminum Association of Canada.
Because of the steep costs and long timelines associated with stopping and restarting smelters, companies are “not laying people off, we’re not curtailing” Mr. Simard said. But with cash flow being impacted, “we’ve had to set aside what we would normally be undertaking in the coming weeks and months to maintain assets.”
And that could have long-term repercussions on the industry’s ability to compete, Mr. Simard said, reiterating a message he delivered in Ottawa last week that the industry needs financial support for those types of necessary annual expenses.
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Meanwhile, as Mr. Trump’s tariffs curtail imports, the U.S. reported a sharp drop in its global trade deficit to a nearly two-year low in June, with a collapse in goods imports from China leading the way, according to the U.S. Census Bureau.
At the same time, the U.S. trade deficit with Canada shrank to US$1.3-billion, the smallest it’s been since October, 2020. Whether that will temper Mr. Trump’s tariff attacks is far from certain.
Uncertainty from the trade war hangs over the outlook for Canada’s economy, with Mr. Janzen noting in a report Tuesday that export volumes in the second quarter “plunged a whopping 31.4 per cent at an annualized rate.”
With a much smaller decline in imports, that leaves trade “on track to subtract substantially” from gross domestic product.
Shelly Kaushik, senior economist at Bank of Montreal, also said trade uncertainty is expected to “weigh heavily on growth.”
She wrote in a note that, “while trade flows have recovered a touch from the spring, normalization is unlikely until the Canada-U.S. relationship stabilizes.”