Tariffs eroding profits and driving up costs, metal manufacturers tell lawmakers

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Metal manufacturers and fabricators aired their complaints about trade barriers in Ottawa on Tuesday, telling members of Parliament that U.S. tariffs on steel and aluminum coupled with Canada’s countermeasures are eroding profits and driving up costs. This is giving foreign rivals an edge, the business people said, appearing before the standing committee on international trade.

Chris Wharin of Bohne Spring Industries Ltd., a Toronto-based maker of springs, wire and metal work for automotive and other uses, said that to keep its customers, the company cannot pass on some of the higher import and manufacturing costs incurred since Canada placed retaliatory tariffs of 10 per cent and 25 per cent on metal products from the United States.

“This is having a crippling effect on our cash flow and profits,” he said, adding the company relies on U.S. suppliers for much its steel and is unable to find domestic replacements.

Mr. Wharin said tariffs and shortages have driven up material costs by 50 per cent to 60 per cent in some cases and the company has paid $50,000 in duties since July 1.

That’s the date Canada imposed tariffs on $16.6-billion worth of U.S. metal products and consumer goods. The move was in retaliation to U.S. President Donald Trump’s import tariffs on global steel and aluminum.

The tariffs remain, even though a proposed free-trade deal, the United States-Mexico-Canada Agreement, was unveiled at the beginning of October.

Canada recently announced importers of some metal products could apply for tariff rebates, but business people at the Commons committee criticized this process as slow and time-consuming.

Mark VanderVeen, an executive with Court Holdings Ltd., which makes parts for cars and trains at subsidiaries in 14 countries, said 90 per cent of the company’s Ontario production is exported to the United States. In the integrated industry fostered by decades of free trade, many parts cross the Canada-U.S. border more than once before being finished. He said the tariffs have driven up costs, strained relationships with customers, taken the company’s focus off innovation and consumed valuable staff time applying for rebates from the government.

“This has taken a Canadian company and its team from tight margins to one that struggles to come close to a break-even point,” Mr. VanderVeen said.

The financial pain of the tariffs is being disproportionately felt by smaller companies that lack the cash flow to absorb them, said Gian Paolo Vescio, external affairs director of the Automotive Parts Manufacturers' Association. He said the rebate scheme recently unveiled by Ottawa is not a sustainable long-term solution.

Tracey Ramsey, an NDP MP and vice-chair of the committee, said just 36 of the 74 applications for tariff rebates have been approved, in part because the government lacks the staff to handle requests. “The money isn’t flowing,” Ms. Ramsey said.

Bilateral talks to remove the tariffs have raised the possibility the United States will impose import quotas on Canadian steel and aluminum, following a model used in an automobile side agreement to the proposed free-trade deal.

However, Jean Simard, head of the Aluminium Association of Canada, said the North American metal industry must trade freely, without tariffs of any kind, and instead focus on foreign dumping and transshipments intended to skirt the rules.

“Aluminum is a commodity and the price is the same all over the world,” Mr. Simard said. “By artificially increasing input costs and constraining metal supply, the impacts of the tariffs are making aluminum costs in North America the highest in the world. This benefits foreign suppliers and hurts our domestic downstream companies, who are pushed out of the market.”