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"The Trump Administration is proceeding with unilateral measures to address what it has characterized as “unfair” trade, risking retaliation, but banking on a threat of massive escalation to extract a favourable outcome for itself."

Tuesday June 12, 2018 — The Trump Administration’s steel and aluminum tariffs will cost jobs and growth, according to a new report released by the C.D. Howe Institute. In “Quantifying the Impacts of the US Section 232 Steel and Aluminum Tariffs”, authors Dan Ciuriak and Jingliang Xiao find that protective trade measures imposed by the United States will reduce US and Canadian GDP, while paradoxically strengthening trade partners outside the North American region through competitive gains.   

The Trump Administration is proceeding with unilateral measures to address what it has characterized as “unfair” trade, risking retaliation, but banking on a threat of massive escalation to extract a favourable outcome for itself.  

Notwithstanding widespread speculation that the threats to impose tariffs on steel and aluminum imports from its major allies would not be acted on, the Administration announced on 30 May 2018 that import duties of 25 percent on steel and 10 percent on aluminum would be imposed on imports from Canada, Mexico, and the European Union. These countries had been granted an exemption due to expire on 1 June 2018 when the duties were first imposed in March 2018.

This study complements the analysis of the potential impacts of these tariffs by contributing computable general equilibrium model simulation impact estimates. Notable findings include:

  • The impact on GDP in value terms is thus relatively larger in Canada at -$8.1 billion (US) than in the United States at -$3.0 billion (US).
  • Both economies become less efficient, with labour productivity falling by about 0.05 percent in the United States and 0.08 percent in Canada.
  • Both economies become less open: US two-way trade falls in real terms by about -0.7 percent; in value terms by over $36 billion (US); meanwhile, Canada’s trade decline is less at about -0.3 percent for exports and -0.6 percent for imports. In value terms, Canada’s two-way trade falls by close to $4 billion (US).

Read the full report

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

For more information contact:  Dan Ciuriak, Fellow-in-Residence with the C.D. Howe Institute; Jingliang Xiao, a Research Associate with Ciuriak Consulting: 416-865-9935 or email: lbouchard@cdhowe.org