(Rio Tinto/Contributed)

U.S. proposed steel, aluminum tariffs leave uncertainty for B.C. site

Rio Tinto has been operating in British Columbia for over 60 years, but tariffs cause fear

President Donald Trump has lobbed a grenade of uncertainty onto the NAFTA negotiating table, suggesting Monday that tariffs on Canadian and Mexican steel are now dependent on whether the countries agree to a new trade pact.

The threat unfolded in tandem with a related development in Mexico City. At the end of the latest round of NAFTA talks, the U.S. trade czar indicated his desire to drive toward a quick deal — and not only complete an agreement within months, but then also hold public consultations before a final ratification vote by year’s end in the U.S. Congress.

That raises the prospect of a pressure-cooker of a negotiation over the coming months, with the twin ingredients of a tariff fight and trade talks being potentially blended together into one sizzling political stew.

“We’re not backing down… Right now, 100 per cent (chance we proceed with tariffs),” Trump said Monday in the Oval Office.

”But it could be a part of NAFTA.”

In B.C., it’s unsure at this point how the proposed U.S. government’s 10 per cent tariff on aluminium imported into the U.S. would impact Rio Tinto’s BC Works in Kitimat.

What is certain, however, is that Canadian aluminium producers were taken by surprise by U.S. president Donald Trump’s premature announcement.

“At this stage we cannot measure the impact of the tariff. We don’t have exact details – it’s too soon,” said Rio Tinto Canada’s manager of media relations, Claudine Gagnon.

“We knew that there were discussions around Section 232 and trade. We knew a decision would come.”

The Trump administration launched a Section 232 investigation last year into the impact of imported steel and aluminium on the U.S.’ national security. Section 232 of the U.S. Trade Expansion Act of 1962 gives the president the power to impose restrictions on imports to protect national security.

READ MORE: Trump tweets that steel, aluminum tariffs stay unless there’s a new NAFTA deal

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“We don’t have all the details but we are going to continue to engage with U.S. officials and show them the benefits of the integrated North American aluminium supply chain,” said Gagnon.

She said representatives from Rio Tinto Canada and the Canadian Aluminium Association are also in talks with senior Canadian government and union representatives.

Gagnon said the proposed tariff is of great concern, especially for Kitimat’s BC Works, which exports 50 per cent of its production to the U.S.

She said 70 per cent of aluminium produced in Canada is shipped to the U.S., with sales in more than 35 U.S. states, supplying a third of the aluminium to the North American market.

Last year Rio Tinto and the other aluminium producers in Canada exported a combined 2,759,000 metric tons of aluminium, valued at over U.S. $5.6 billion, to the U.S.

“We are the leading primary metal supplier for those products that are used to manufacture for example the Ford F150,” said Gagnon. “It’s very important for employees and supplier chains.”

President and CEO of the Aluminium Association of Canada, Jean Simard, said the problem wasn’t the export of Canadian aluminium to the U.S., rather the export of aluminium from China.

“If the U.S. hits its strategic allies such as Canada with measures, they are missing the appropriate target and they expose their economy to serious adverse effects that are greater than the expected gains,” said Simard.

“The problem of Chinese overcapacity is one we all face. Canada has always been part of the solution and should be treated as such,” added Simard.

He said the blanket imposition of the tariff on the U.S.’ historic allies, Canada and Europe, “is a real invitation to a significant commercial trade conflict that will serve no one”.

“We can expect retaliatory measures elsewhere in the world that will destabilize market equilibrium. Unfortunately, the real problem, Chinese overcapacity, will remain unresolved,” he added.

Simard was in Kitimat in June last year to present a state of the aluminium industry report to Kitimat Chamber of Commerce members. During his presentation, he said it was essential that Canada stop relying on the U.S. to take the majority of its aluminium and develop a new market in Europe.

“With Trump in power, the aluminium industry is also up in the air,” were Simard’s prophetic words at the time.

“Europe is the new China – we have to think out the box now. This is part of the change that is ahead of us. Our stability is going to be ensured through change. It’s time we build a new agreement with Europe.”

Last week Kitimat Unifor Local 2301 president Sean O’Driscoll said Unifor representatives would be meeting with the provincial energy and trade ministers in Victoria to lobby on behalf of BC Works members and the community.

“We are disappointed, to say the least, that the Trump administration would impose a potentially debilitating tariff on aluminium imports from the Kitimat smelter,” said O’Driscoll.

“Rio Tinto has recently been growing its market for Kitimat aluminium in the U.S., and given that, ironically, our countries are currently attempting to renegotiate a new fair trade agreement under NAFTA, this move by the U.S. is troubling to our members.”

Unifor Quebec director Renaud Gagné said it was clear that the U.S. was using the tariffs as a trade weapon.

“It’s no accident that these duties were announced while NAFTA talks are underway. The federal government must stand and fight, here and now, against this threat by the U.S. government and supporting stakeholders,” said Gagné.

Unifor national president Jerry Dias said Trump has made it clear that Canada’s steel and aluminium industries are being held hostage to extort a NAFTA deal.

“Trump plainly stated that tariffs will only come off if Canada signs a NAFTA agreement to his liking,” said Dias. “The question now is whether the Canadian government is going to submit to trade blackmail.”

He said if the tariffs on steel and aluminium exports to U.S. are implemented, the Canadian government would have no choice but to withdraw from North American Fair Trade Agreement renegotiations.

“If America imposes duties on steel and aluminium and Canada doesn’t walk away from NAFTA immediately then make no mistake we will no longer be negotiating, we’ll be capitulating,” said Dias.

He said the tariffs would also hurt the U.S. auto industry and result in higher costs for consumers on both sides of the border.

“The auto supply chain is completely intertwined. A cost increase of this magnitude will drive consumers directly into the arms of Japanese car makers,” said Dias.

With files from The Canadian Press

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