US delay of Canada, Mexico tariffs further muddles North America’s steel market

The instability from last year’s close US presidential election between incumbent President Joe Biden and former President Donald Trump paralyzed steel prices for much of 2024.

When Trump emerged the victor and returned to office, the US steel industry released a collective sigh of relief that the contest was over — and loudly cheered the possible return of strong tariffs, which defined Trump’s first term.

Over the span of a just a few days, however, the Trump administration placed, and then pulled, tariffs of 25% on Canadian and Mexican goods. The tariffs, nominally slated to begin in early February to control the flow of illegal drugs across both borders, have now been pushed back to March while the governments of the United States-Mexico-Canada Agreement (USMCA) trade partnership negotiate border control measures.

Fastmarkets analyst Felix Bello said the tariff issue pits several competing interests against each other — and it’s unclear who stands to benefit.

“Uncertainty is extremely high, and the market is very fluid at this time, so everyone selling is erring on the high side. Particularly mills, despite economic fundamentals indicating that the market is bleak, at best. And, that the tariff pendulum may swing the other way tomorrow,” he said.

“What is also in play, but not making headlines, is that the tariffs as proposed unfairly favor the steel industry versus downstream industries such as auto, appliances, etcetera, which puts the administration in a bind for choosing favorites and, therefore, the need to backtrack,” Bello added. “In an inextricably linked manufacturing world, progress on trade issues alone is a lot harder than it used to be. Adding immigration and drugs to the mix may bring progress to a halt, or even set it back.”

Here’s a snapshot of further market reactions from participants throughout North and South America:

• “My take is, this is a way for Trump to renegotiate the USMCA, which was negotiated by Trump during his first term but proved to be a bad agreement. I can’t believe that these 25% tariffs will stick.” — US trader
• “Sources have confirmed Canadian mills stopped selling their coils into Midwest USA as they prepared for imminent tariffs against Canada. I expect less imports into USA. The next four years will not be favorable to any mills exporting to USA.” — US producer
• “Canadian mill pricing is softening as expectations for tariffs being invoked looms large. Lead times are short in the US and Canada, but despite the weak order books, we hear US mills are anticipating increases next week. Can’t wait to see if the ink in [Trump’s] sharpie pen was permanent or the disappearing kind; you just never know.” — US distributor
• “Some market participants are acting cautiously to see what will happen in the next two or three months. Everything seems to indicate that there will be price increases in US steel [as a result of the adoption of tariffs]; what we can’t know for sure yet is how this will affect the domestic Mexican price.” — Mexican trader
• “I’m not sure of the effects of the on-and-off-again tariffs.” — second US distributor
• “I personally don’t think that Canada or Mexico is going to be an issue. Things will tighten up. Both leaders — Canada and Mexico — will stand firm…for about an hour. The global economy is tenuous at best.” — second US trader
• “We don’t have the full picture yet, but I don’t think Brazil would benefit from any of these tariffs [even though it is the second largest exporter of steel to the US, between Canada and Mexico], because the country is affected by Section 232 and anti-dumping restrictions. Mexico is a net importer of steel from the United States, so we have to assess the impacts of any Mexican retaliation.” — Brazilian industrial researcher