Canadian and US Steel Markets Begin to Diverge

Canada’s steel industry has been significantly impacted by the reintroduction of tariffs since US President Donald Trump resumed office in January.

Up until March 12, Canada had been exempt from the 25% Section 232 tariffs—along with Mexico—since May 2019. However, as of that date, US steel importers are now required to pay a 25% tariff on Canadian-origin steel, with the possibility of additional tariffs being imposed in the future.

This newly enforced tariff is expected to dampen demand for Canadian steel, potentially shrinking Canada’s steel sector unless there is a reduction in import volumes and steelmakers expand into other international markets.

Canada, a key participant in the USMCA (United States-Mexico-Canada Agreement), has long been the largest steel exporter to the US, a position it has held since at least 2010. The country’s steelmakers produce around 12 million tonnes of steel annually, with half of that volume being sent to the US. By 2024, nearly 95% of Canadian steel exports were directed to the US, underscoring the country’s heavy reliance on its southern neighbor.

Moreover, Canada is one of the largest importers of US-produced steel, importing nearly four million tonnes annually over the past decade. In 2023, Canada and Mexico accounted for 93% of the 8.4 million tonnes of steel exported from the US.

Canadian Steel Prices Diverge from US Prices

Historically, steel prices in Canada and the US have tracked closely. In October 2024, US hot-rolled coil prices stood at USD772 per tonne, compared to USD776 per tonne in Canada. However, by March 2025, US prices had surged to 38% higher than Canadian prices. According to MEPS (Metallurgical Engineering and Processing Services) respondents, Canadian mills initially absorbed the 25% tariff impact, but this strategy is expected to become unsustainable in the long run. With low-cost imports from other countries now facing the same tariff, coupled with an increase in domestic supply, US buyers are likely to become less reliant on Canadian steel.

Canadian producers are already feeling the effects of reduced US demand. In March 2025, just 414,000 tonnes of Canadian-origin steel were imported into the US, marking the lowest volume since the early months of the Covid-19 pandemic in 2020.

Ronsco predicts that US prices will remain approximately 25% higher than Canadian prices as long as the Section 232 tariffs remain in place. This creates a significant challenge for Canadian steel mills, given the deeply interconnected economies of the two countries. Among Canada’s major steel producers—Stelco, Dofasco, and Algoma—Algoma appears to be most vulnerable to the current market pressures.

Canadian Steel Mills Seek Government Assistance

While Stelco and Dofasco benefit from the support of large parent companies, Algoma operates independently and has an annual steelmaking capacity of around 3 million tonnes. The company is in the midst of completing an USD875 million project to replace its blast furnaces with Electric Arc Furnaces (EAFs).

“The timing of this capital project, combined with the reinstated 25% Section 232 tariffs, couldn’t be worse for Algoma,” stated a Ronsco steel market analyst.

The Canadian Steel Producers Association is urging the federal government to provide more support for the steel sector. In response to global overcapacity, the industry is calling for additional safeguard measures to protect domestic mills from price pressures created by low-cost imports. They are also advocating for “Buy Canadian” mandates on public infrastructure procurement to help sustain the local industry.

In October 2024, Canada imposed a 25% tariff on Chinese steel and aluminum. In retaliation for the US tariffs, Canada also levied a 25% tariff on USD29.8 billion worth of US goods, including USD12.6 billion in steel products. Furthermore, the Canadian government recently held a consultation to gather feedback from stakeholders regarding future steel import policies.

Without additional support, the Canadian steel industry may face a smaller, less competitive future.