The Current - Steel, aluminum tariffs will ‘make America more expensive’ again

Episode Date: February 11, 2025

Tariffs on steel and aluminum will impact steelworkers in Sault Ste. Marie, but the city’s Mayor Matthew Shoemaker says they’re also a surefire way of “making America more expensive again.” Matt Galloway talks to Shoemaker and international trade lawyer John Veroneau about what U.S. President Donald Trump is trying to achieve, and what happened when he imposed similar tariffs in 2018.

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It's a big deal. This is the beginning of making America rich again. You can be forgiven if you're starting to develop tariff whiplash less than a week after Donald Trump agreed to delay across-the-board Tariffs on Canadian goods for a month as you heard from the sound of the sharpie there He is putting other tariffs on last night He signed an executive order putting 25 tariffs on all steel and aluminum imports into the United States Including Canadian products his commerce secretary and tariff chief Howard Lutnick was standing beside him

Remember these aren't just general jobs. These are steel workers in America, and now you're going to bring them back, you're going to bring those 120,000 jobs back to America. You are the president who's standing up for the American steel worker. Steel workers in Hamilton, Ontario, home to some of Canada's largest steel manufacturers, responded. It'll be bad for everybody because we have Mexican parts that come in and we sell to

the United States. Everybody's worried about it. It's going to cost a lot for us. It's going to hurt the steel industry. Sault Ste. Marie, Ontario on the eastern end of Lake Superior is home to another steel giant. Algoma Steel is the largest employer in that

city. Matthew Shoemaker is the mayor of Sault St. Marie. Mayor Shoemaker, good morning. Good morning. How big of an economic engine is Algoma Steel to the Sioux's economy? Oh, it can trace its impact to about 50% of the

economy, whether directly or indirectly. So it is a major issue when anything happens that affects Algoma Steel's bottom line as it's currently happening. 50% of the city's economy is in some ways connected to that industry. That's right. So when you hear.

Not Sault Ste. Marie, Ontario, but Sault Ste. Marie, Michigan across the border as well relies heavily on people spending their retail dollars across there. So when you hear Donald Trump applying his signature to an executive order, bringing tariffs in on steel and aluminum exports from Canada and other places into the United States, what kind

of sleepless nights do you have? Yeah, very sleepless. You heard him say it's the beginning of making America great again. The reality is it's the beginning of making America more expensive again because this Trump tax increase is going to hit American consumers when they're buying things like Teslas and when they're buying hot water tanks for their first home and when they're buying beer cans with the aluminum tariffs.

So this is going to directly increase the price of American goods and make life more affordable, make America more expensive for American consumers. I mean, that's important. That's important. An important message, presumably for the Americans to hear, but what about for people in your town? I mean, how worried are you about what this

will mean for jobs and for the overall economy in Sault Ste. Marie? Yeah, worried. We are reliving the past in Sault Ste. Marie? Yeah, worried. Uh, we are, uh, reliving the past in Sault Ste. Marie. We had these, uh, 25% steel tariffs in 2018

when Trump was in his first term and it had a real economic impact, hundreds of millions of dollars out of the steel plants bottom line. And that was, uh, uh, hundreds of millions that wasn't being spent on, uh, you know, local contractors, local goods, uh, donating donating to local causes which steel plant does quite frequently so it is a real big blow to uh... the community

uh... we're bracing for it of course we've got a month until uh... they they are implemented and uh... the hope is that the federal government will implement retaliatory tariffs right away to uh... counter it because that seemed to break the logjam in 2018, 19, when these were last implemented. Can you just tell me a bit more about what happened in 2018? The steel imports to the United States from Canada,

when those tariffs were imposed back then, those imports dropped by almost 40%. What did that mean practically for people who work in that industry, but also as you mentioned, you know, the spinoff industries and everything that's around where the people who work in the plant go to spend their money at the cafe or at the grocery store or what have you. What did that mean in Susan Marie? Yeah, it meant a real dollar economic withdrawal

of money from our community. So it was retailers felt it, businesses felt it, the steel plant of course felt it. What it, the difference I think between last time and this time, and it's a difference that gives us a lot of concern, is that last time there was no hint of broad-based tariffs. It was just steel and aluminum tariffs. So the federal government was able to target relief to the communities that needed it. And that's when you saw Algoma in the Sioux and Stelco and DeFasco and Hamilton get these major investments, four or five hundred million dollar

investments from the federal government to transition their operations from coal-based steel making to electric steel making, which they're now in the process of doing. We're about halfway there. But the reality is, you know, if every community, you know, a month from now when this so-called reprieve that we were supposed to get is impacted by tariffs, the federal government's simply not going to have the fiscal capacity to invest hundreds of millions of dollars into every community. So it's a greater risk that the industries will have to simply eat that burden

and face the economic consequences of it. So it's uncertain times for sure. It would mean a lot of people out of work. You know, that's I think a possibility. I'd let the steel plant comment on that. Not even so much just with the steel plant, but again, if people aren't making money, they aren't spending money.

And that has a knock on effect. It would have a direct impact on restaurants, on, as you said, cafes, that has, that has a knock on effect. It would have a direct impact on restaurants, on, as you said, cafes, grocery stores, retailers that rely on steel plant wages or indirect steel plant income to, you know, buy the things and go to the places that their family needs. So that is one impact that will, will definitely come out of the, out of the economy here. here and also as I noted, the economy

in Sault Ste. Marie, Michigan where a three-minute drive across the bridge has a lot of Canadians filling up their gas tanks and spending at the grocery store. What we are saying as a community now is where you can spend your money in Canada because, uh, you know, the, the friendship that has survived 212 years of, uh, of peace, uh, is now at, uh, at, at loggerheads. You heard Howard Lucknick there talk about how 120,000 jobs in that industry could come back to the United States, he believes. You've said that these tariffs are a senseless

act of aggression. Is there any, any part of you that can begin to understand where they're coming from? No, no, because, um, when a car part, for example, um, is produced, it will go across the border and a steel car part, like a door, for example, will go across the border three to four times. So right now what that part is,

what's happening to that part is every time it's getting back into the US, it's being tariffed again. So it's only going to make, and the supply chain is so integrated that it would take, you know, a generation to deintegrate or disintegrate that supply chain. So while he may think that the short term benefits of of this are what he's looking for from an economic standpoint, the reality is that having good trade relationships, our reciprocal trade is 700 billion between the two countries. It is not like we are not buying from them. It's that they're buying more from us,

mostly in the energy sector. So what they cut back on, we are going to similarly cut back on and hurt their bottom line of the corporations that benefit from us buying their products. You mentioned that Sault Ste. Marie shares that bridge with Sault Ste. Marie, Michigan. Do you think that people on the other side of

that bridge understand what's going on? Oh, absolutely. We are in a very unique situation here in the Sault because the Canadian city is about five times larger than the American city, which is very uncommon on Canada, US borders. Usually, or typically the American city is larger. So the American city is larger.

So the American-Summit economy relies significantly on Canadian dollars being spent over there, and I'm not joking, I mean it's a way of life for people to go over there, buy groceries, buy gas, especially when the dollar is a little stronger. But even when the dollar's not as strong, the exchange still makes the gas and grocery purchases often worth the trip. But people are cutting that off completely. They are saying, we are not going into the US. We are not spending our tourist dollars at

45 minutes away in Mackinac Island or a couple of hours away in Traverse City. Those are Canadians that are going to patriot their dollars to Canadian tourism attractions, Canadian retailers, and it certainly won't offset the industrial economic impacts that the steel plan is going to face as a result of this change, but it will have an effect on

American businesses and that's really what we need. We need Americans to be telling their government that this is silly. I'll let you go, but you said that, you know, there's that friendship across the bridge. We had the same conversation when we were down in Windsor at the edge of Detroit, just last week talking to people who live in two places, as we were saying, at the same time, in some ways. Do you worry about, this is the beginning of his term, do you worry about that friendship across that bridge? I do. during the last Trump presidency, I mean, it was largely as a result of COVID, but, um, for, for decades and decades, the Sault Ste.

Marie Ontario and Mission City councils had met, uh, together and, uh, and discussed economic development opportunities or tourism opportunities together, and that all came to a halt in 2020. Uh, and it wasn't until the beginning of this municipal term in 2022 that we were able to rekindle that friendship and it has been really strong. I mean we have a great colleague in Sioux Michigan with Mayor Gerry and rely on them for their friendship, their you know joint economic and tourism developments. But the reality is this is going to affect the

willingness of community members to go one way or the other. Matthew Shoemaker, good to talk to you. Thank you very much. Thanks very much. Matthew Shoemaker is the Mayor of Sault Ste. Marie, Ontario. Hey there, I'm David Common. If you're like me, there are things you love about living

in the GTA and things that drive you absolutely crazy. Every day on This is Toronto Toronto we connect you to what matters most about life in the GTA, the news you gotta know and the conversations your friends will be talking about. Whether you listen on a run through your neighbourhood or while sitting in the parking lot that is the 401, check out This Is Toronto, wherever you get your podcasts. Tariffs on steel and aluminum will hurt, especially in places like the Sioux. Canada will likely respond with tariffs of its own. Here is what the Premier of Ontario, Doug Ford, had to say about that on CNBC. Well, that's the last thing we want to do, but we will retaliate. And you know, Canada will feel the pain, there's no doubt.

But I can assure you, when we retaliate, the Americans will feel the pain. And for what reason? That's a good question. To dig into that, we're joined by former US trade negotiator, John Verino. He is now an international trade lawyer based in Washington, DC. John, good morning to you. Good morning. Help us in this country understand, if you can, why is U.S. President Donald Trump imposing

tariffs on steel and aluminum now? Well, he believes that tariffs will help re-industrialize the U.S. economy. I don't share his views on that, to be clear, but I think he is a man who loves tariffs, thinks they are good for America, has self-described himself as tariff man and has said that tariffs is one of the most beautiful words in the dictionary. So he is someone who campaigned on raising tariffs and much to my chagrin, he is following through on those promises. Tell me a bit more about that because I think, I mean, to a lot of people here in this country, they're trying to figure out why the United States would kind of economically cripple its next door neighbor and closest trading ally. You hear Howard Lucknick talk about how 120,000 jobs

he believes could come back into the country. We spoken with Orrin Kass from American Compass, a think tank who talks about tariffs, resetting the trade balance and trade relationship that the United States has with other countries. How far will tariffs go to bring back those jobs to the United States? Well, if you block imports or severely limit imports, you can create domestic jobs. Any country can do that.

The question is on balance, is that a good thing for your country? And the costs of those tariffs and those border restrictions, import restrictions have been proven time and time again to exceed the benefits. So you can always create some jobs, but the cost of that on U.S. consumers, on U.S. exporters, not to mention the goodwill that is being destroyed right now with our friends like Canada, our friends in Canada and other countries. It is a very costly approach, but, and I suspect those costs will be appreciated over time, but as of this week at least,

we have a president who is committed to his belief that tariffs are good for America. When this happened in 2018 and these tariffs were imposed on this same sector, who were the winners and losers back then? Well, in the short term, US steel makers were an aluminum makers benefited,

although those benefits declined over time, but they do provide a short term benefit. They provided a political benefit short term to the president, but the costs were borne out as every study, including studies by the Federal Reserve Bank and many economists and universities have shown that the cost for every job created was in the order of, you know, $500,000 to $800,000 per job. That's a lot of cost on American households.

And those are in sectors, I mean, we heard about the car sector and the fact that vehicles go back and forth and back and forth and back and forth. What else automatically becomes more expensive in the United States when these tariffs are imposed? Well, I think it's too soon to know, but I think at a minimum, because it depends

on how countries respond, and I think countries will respond as you would expect, they will retaliate. That's the history of trade wars, is country A raises tariffs and country B responds in kind and it ends up being a lose-lose proposition. But unfortunately it typically takes a little bit of time for those costs to be fully appreciated by people and right now the president, I suspect, is enjoying some political support, but to be clear, there's

many, many people in America who oppose these tariffs, including downstream manufacturers who are now going to be at a disadvantage to their competitors in other parts of the world, where ironically, if you make products, you manufacture products here using steel or aluminum, you face a 25% tariff on your input that your competitors don't. So it makes it cheaper to bring in finished goods from Europe or Asia,

because they don't face the tariffs that we impose on our own downstream manufacturers. So it does these interventions create a lot of uncertainty and a lot of costs for American consumers and downstream manufacturers as well as exporters who will face the brunt of the the market closings that you can expect other countries to have in response to our market closings. I'm not asking you to put the president on the couch, but do you think that chaos is kind of the point here?

Does he enjoy the chaos that's been created? Well, I think he enjoys being at the center of attention. And when you have a president at the center of attention solving problems, it necessarily creates chaos. And I would use as an example, you know, two weeks ago, the drama of the day was the repatriation of Columbia nationals. There was a, you know, kerfluffle in that process we don't need to get into, but it's a problem that would have been solved by a

deputy assistant secretary of state in normal times and it would not have been front-page news. But we have a president who likes to be the center of attention and as a result its processes and problem solving are much more chaotic and dramatic than they need to be. As you mentioned, there are many Americans who don't support this, and they go through industry, labor unions, economists, and what have you. If he is determined to bring in tariffs,

who's gonna stand in his way, do you think? Or who could stand in his way? Well, under our constitution, Congress has clear primary authority over tariffs and trade policy. My hope is that Congress will assert itself in its constitutional prerogatives to determine tariff levels.

They did not assert themselves in the first Trump administration, for the most part. But we'll see if they will. The courts have been, could be another source. There will be challenges to these actions. And we'll see if the courts can. But courts have been, I think, reluctant to second-guess

presidential determinations, especially if they regard national security, however thinly supported those claims are. But hopefully Congress will certainly be hearing from many of its constituents about the negative impacts of these tariffs. But that takes a little bit of time. So, but hopefully at some point in Congress we'll assert its constitutional role to set tariff policy. I have to let you go, but just very briefly, how does it feel to be a proponent of free trade

in the United States in 2025? It feels a little bit lonely sometimes, but it's, you know, sometimes, you know, lessons of history have to be relearned and I feel like we're in the classroom right now. This is a tough lesson. John Verenaud, it's good to speak with you. Thank you very much. Great.

Thank you. John Verenaud was deputy US trade representative under George W. Bush. He was in Washington, DC. For more CBC podcasts, go to cbc.ca slash podcasts.