Canadian steelmakers offset some U.S. tariff pain with domestic demand

Canada’s steel industry was among the sectors hit first and hardest by U.S. President Donald Trump’s tariffs. It is beginning to turn a corner as mining, energy and AI data centre projects pick up and government support flows, though the impact varies across the country. Canada is a small steel producer globally, and the sector contributes less than one per cent of national GDP. Still, Prime Minister Mark Carney’s effort to make the economy less reliant on the United States appears to be making some headway in steel, with substantial government intervention.

Steelmakers, analysts and union representatives say companies have been diversifying away from the U.S. and focusing on domestic demand since Trump raised tariffs on imported steel from 25 per cent to 50 per cent in June 2025. Canada previously sent about 90 per cent of its steel exports to the U.S.; shipments fell 60 per cent in 2025, according to the Canadian Steel Producers Association. Hundreds of steelworkers have been laid off.

The domestic share of steel used in Canada rose to 51 per cent in 2025 from 41 per cent in 2024, while the import share fell to 49 per cent from 59 per cent. United Steelworkers, the sector’s main union, calculated the figures using World Steel Data and Canadian steel import data, said Guio Jacinto, an economic researcher for the union.

The early signs of growth are mostly in Western Canada, where several large industrial projects are under construction, including a 1.2-gigawatt data centre in Saskatchewan. Carney has said a new oil pipeline to the Pacific Coast would also boost steel demand. A report published by the OECD in July estimated that Canadian steel demand grew about 2.7 per cent in 2025 and projected an increase of about 0.9 per cent in 2026.

David Fritz of Alberta-based Supreme Steel, which manufactures fabricated steel, said more Canadian companies are competing for the domestic market, leaving less room for foreign steelmakers. He said he was optimistic about the outlook for fabricated steel in Canada and that the project pipeline was sufficient to support the industry.

**Government intervention**

With global capacity in surplus, Canadian steel would struggle to compete with lower-cost producers in China and South Korea without import quotas. Canada produces about 13 million tonnes of primary steel annually.

In May, the federal government announced $1 billion (US$700 million) in loans for the steel, aluminum and copper industries to provide working capital and help them weather the effects of U.S. tariffs. The government also extended a cap on foreign steel entering Canada, known as a tariff-rate quota, to address foreign steel dumping.

Canada’s response to Trump’s tariffs is being closely watched internationally. Carney is among the few world leaders to retaliate against U.S. tariffs, despite Canada’s overwhelming economic dependence on the U.S. The prime minister also threatened legal action against U.S. steelmaker Cleveland-Cliffs over plans to cut hundreds of jobs at its Hamilton, Ont., facility.

Cleveland-Cliffs, which acquired Canada’s Stelco in 2024, said in its second-quarter earnings report that the Hamilton plant’s galvanized steel faced steep international competition. The market for a specific hot-rolled steel product made elsewhere in Canada, however, contributed to improved guidance for the second half of 2026. The company is scheduled to report quarterly results on October 19, which could offer a clearer picture of its Canadian operations.

**Pivot to the domestic market**

Luxembourg-based Tenaris, which makes steel pipes for energy companies at its Sault Ste. Marie, Ont., facility, said it recently invested $306 million to expand production of Canadian-made products for Canadian customers. “This strengthens Tenaris’s commitment to produce in Canada what Canada’s oil and gas industry needs. As a result, the company’s exposure to U.S. tariffs is limited,” said Martín Castro, Tenaris’s president in Canada, in an email.

Algoma, Canada’s largest steel producer, announced in December that it would lay off 1,000 workers in Ontario, accounting for nearly all steel-sector layoffs nationally since the tariffs were imposed. The company’s CEO recently pointed to a strengthening domestic market, citing growing infrastructure, construction and defence demand for its discrete steel plate.

“While the 50 per cent U.S. Section 232 tariffs continue to effectively foreclose our traditional access to the U.S. market, our pivot to a Canada-centric, plate-first strategy is working,” CEO Rajat Marwah said on an earnings call in July.

Marty Warren, head of the Canadian branch of United Steelworkers, said the industry has turned a corner, but a larger revival would require replacing even more imported steel with domestic production. The union also wants Canada to tighten the quota on imported steel and impose tariffs on steel used in the U.S. auto and aviation industries, which are currently exempt from Canada’s broader retaliatory tariffs.

The Department of Finance Canada said the steel sector remained exposed to tariffs and that the government was encouraging investment through policies such as buying Canadian steel for infrastructure projects. In an emailed statement, the department said the domestic demand cycle enabled by the Buy Canadian policy, along with the government’s broader growth agenda, would require Canadian steel and workers.