Prime Minister Mark Carney expected to announce measures to protect Canada's steel industry

Key Concepts: Budget 2025, Economic Resilience, US Tariffs, Strategic Industries (Steel, Aluminum, Lumber, Auto), Tariff-Free Quotas, Steel Derivative Products, Foreign Steel Dumping, Canadian Border Service Agency (CBSA), Temporary Horizontal Remission of Tariffs, "Buy Canadian" Policy, Build Canada Homes, Interprovincial Freight Rates, Work-Sharing Programs, Income Replacement Benefits, Softwood Lumber Guarantee Program, Large Enterprise Tariff Loan Facility, Single Window for Forestry Sector Support, Canadian Forest Sector Transformation Task Force, Free Trade Agreements (FTAs), Fairly Traded Material.

Context and Economic Imperative

The speaker, identified as the Prime Minister, opened by welcoming Ron Vard, President and CEO of Defasco, acknowledging his role in designing support measures. The core message was that Canada faces a significant economic shift: the decades-long, close economic relationship with the United States has ended, turning Canada's strengths (deep integration with the US) into vulnerabilities. This is particularly evident in industries like steel, lumber, aluminum, and auto, where 75-90% of exports historically went to the US.

The economic impact of US tariffs and associated uncertainty is estimated to cost Canadians approximately 1.8% of GDP, equating to $50 billion or $1,300 per Canadian. This "rupture" necessitates a rapid and dramatic change in Canada's economic strategy, outlined in Budget 2025. The plan aims to move the economy from "reliance to resilience" by unleashing $1 trillion in total investments over the next five years, projected to increase GDP by over 3.5% (or $3,500 per Canadian worker). The immediate focus is to protect workers and industries most exposed to US tariffs, helping them "bridge to the future."

Previous Government Measures and Their Impact

The government has already implemented several measures to address these challenges:

• July (2024): Restricted foreign steel imports, expanded training and income support for steelworkers, and provided liquidity relief. A notable example is a $400 million loan to Algoma Steel in Sault Ste. Marie to help it transition to a business model less reliant on the US market.
• August (2024): Introduced measures for the softwood lumber industry, including financing for company restructuring, investments to diversify products, income and training supports for affected workers, and prioritizing Canadian lumber in home building.
• September (2024): Launched a comprehensive industrial strategy with new reskilling programs, a $5 billion Strategic Response Fund to help businesses pivot to new markets, and announced a new "Buy Canadian" policy across federal agencies. Red tape was reduced, and loan limits increased for large firms needing liquidity.

These initiatives have shown results:

• Nearly 1,500 applications were received through the Regional Tariff Response Initiative from various sectors (steel, aluminum, lumber, manufacturing, automotive, seafood).
• Over 230 steel firms alone applied, with support already being delivered.
• Examples: Cherabini Metal Works (Nova Scotia) is modernizing for overseas exports, and Hooper Welding (Hamilton) is expanding capacity for Canadian and international energy projects.
• These investments have protected approximately 37,000 Canadians, preventing over 14,000 job losses.
• Overall, the Canadian economy has seen a rebound, with over 120,000 total jobs created since March.

New Strengthened Measures for Industrial Transformation

Today's announcement reinforces this momentum with new measures focused on three core objectives:

1. Limiting Foreign Steel Imports to Increase Domestic Demand

These measures aim to unlock hundreds of millions of dollars in domestic demand for Canadian steel producers:

• Reduced Tariff-Free Quotas (Non-FTA Partners): Tariff-free steel imports from non-free trade area partners will be reduced from 50% of 2024 levels to 20%. This is projected to open up over $850 million in new domestic demand for Canadian steel.
• Reduced Tariff-Free Quotas (Non-CUSMA FTA Partners): Tariff-free steel imports from non-CUSMA (Canada-United States-Mexico Agreement) free trade area partners will be reduced from 100% of 2024 levels to 75%, unlocking over $540 million in additional market access.
• Global Tariff on Steel Derivative Products: A global 25% tariff will be imposed on targeted imported steel derivative products, such as wind towers, prefabricated buildings, fasteners, and wires. These products collectively represent a $10 billion market.
• Enhanced Compliance Measures: The Canadian Border Service Agency (CBSA) will be equipped with a dedicated steel compliance team, enhanced detection of false declarations, and expanded online reporting tools to prevent foreign steel dumping.
• End of Temporary Remission: Temporary horizontal remission of Canadian tariffs on imports will end on January 31, 2026, for steel used in manufacturing, food and beverage packaging, and agricultural production. This provides Canadian companies time to adjust their supply chains to use Canadian steel.

2. Becoming Canada's Own Best Customer ("Buy Canadian")

The government will prioritize Canadian materials in its own projects and programs:

• "Buy Canadian" Policy Implementation: Later this year, a "Buy Canadian" policy will ensure Canadian materials, including steel and lumber, are prioritized in all federal contracts over $25 million. This will apply across federal grants and contribution programs, especially in infrastructure.
• Maximizing Canadian Softwood Lumber: To maximize the use of Canadian softwood lumber in housing and infrastructure, the government will prioritize shovel-ready, multi-year projects that can begin within the next 12 months, specifically using Canadian wood.
• Build Canada Homes: The new federal home-building agency, Build Canada Homes, with a funding allocation of roughly $700 million next year, is expected to create $70-140 million of new demand for Canadian wood products and attract private and provincial capital.
• Reduced Interprovincial Freight Rates: Freight rates for transporting steel and lumber interprovincially will be cut by 50% through direct funding to Canadian National (CN) and Canadian Pacific Kansas City (CPKC) Railways.

3. Investing in Workers and Businesses

Measures to help workers and businesses adapt and seize new opportunities:

• Enhanced Worker Support: Existing supports will be expanded, and work-sharing programs enhanced, increasing income replacement benefits from 55% to 70%.
• Softwood Lumber Financing: An additional $500 million will be provided to the Business Development Bank of Canada's (BDC) Softwood Lumber Guarantee Program to ensure companies have necessary financing and credit support.
• Large Enterprise Tariff Loan Facility: $500 million in funding will be deployed under the Large Enterprise Tariff Loan Facility specifically for larger softwood lumber firms facing liquidity pressures.
• Streamlined Forestry Sector Support: A "single window" (one-stop shop) will be established to make it easier for the forestry sector to access federal support programs.
• Canadian Forest Sector Transformation Task Force: A task force will be launched to gather input and recommendations from provinces, territories, and industry on seizing new opportunities in softwood lumber.

Broader Economic Strategy and International Trade

Budget 2025's investments in infrastructure and housing, alongside new trade and investment partnerships, are expected to generate significant demand for Canadian steel and lumber. Recent international engagements include:

• UAE: Announced a $70 billion investment in Canada.
• G20 (Johannesburg): Discussions launched for a Canada-South Africa Foreign Investment Promotion and Partnership Agreement.
• India: Agreed to launch comprehensive free trade talks with the world's fifth-largest economy.
• Philippines and Thailand: Intent to conclude free trade deals within a year, emphasizing a faster negotiation timeline compared to traditional 5-8 year processes.

The Prime Minister reiterated that Canadian steel and lumber industries are vital for Canada's competitiveness, security, and strength, reflecting the country's resilient and forward-looking character.

Q&A Highlights

During the Q&A, the Prime Minister clarified several points:

• Alberta Pipeline Deal: A forthcoming Memorandum of Understanding (MOU) with Alberta is about building the economy, increasing independence, and sustainability, encompassing "much more than one thing."
• US Trade Talks: Canada is ready to re-engage with the US on trade talks when the US is. The new measures are a global approach to strengthen Canada's domestic economy, not targeted at the US.
• Tariffs and Retaliation: The new tariffs on steel derivative products are global and do not specifically target the US. Changes to tariff-free quotas for non-FTA and non-CUSMA FTA partners do not include the US or Mexico. The ending of temporary remission is a global approach based on Canadian companies' adjustment timelines, not a signal to any specific country.
• China and EU: Canada has positively re-engaged with China on trade. Other jurisdictions, like the European Union, are also adjusting their tariff policies, indicating a global trend of reallocating capacity.
• Rationale for New Measures: The measures were not fully included in the federal budget due to evolving external factors (e.g., additional US tariffs on steel derivatives and lumber, policy changes by other jurisdictions like the EU) and continuous learning from existing programs and industry consultations. The government's strategy is fluid and adaptive.
• Northern Transport Costs: While the 50% rail subsidy for steel and lumber is theoretically national, it practically doesn't apply to much of the North due to a lack of railroads. The government acknowledges high northern transport costs and is addressing them through other infrastructure projects, such as the Callo Hydro initiative, which aims to reduce reliance on costly diesel transport.

Industry Perspective (Ron Vard, Defasco)

Ron Vard, President and CEO of Defasco (ArcelorMittal), expressed strong support for the government's announcement, applauding its commitment to steel sector workers. He highlighted the government's active engagement with industry, listening to concerns "right from the shop floor." Vard confirmed that ArcelorMittal, with 10,000 employees in Canada, has not laid off workers due to tariffs, attributing this to ongoing efforts. He emphasized that Canadian mills can compete with any fairly traded material globally, and the government's actions help "level the playing field" against unfairly traded imports. He praised the government's responsive and adaptive strategy, acknowledging that it's not "etched in granite" given the changing global marketplace.

Conclusion

The comprehensive package of measures announced by the Canadian government, building on previous actions and outlined in Budget 2025, represents a strategic pivot towards economic resilience in response to a changing global trade landscape, particularly the altered relationship with the United States. By limiting foreign imports, prioritizing Canadian materials in domestic projects, and investing in workers and businesses, Canada aims to strengthen its strategic industries, create domestic demand, and diversify its trade relationships globally. The emphasis is on proactive adaptation, continuous learning, and close collaboration with industry to ensure the long-term competitiveness and security of key sectors like steel and lumber.