Steel tariffs will have a widespread effect on prices, but it's still unknown if they will actually happen or if it's just posturing, says Golden West Radio business commentator Paul Martin.
Recently, U.S. President Donald Trump signed an executive order to impose steel tariffs on Canadian steel starting March 12.
This would impact companies like Evraz, as well as the pipe mill next door, Martin said. He added it would drive up the price of steel worldwide, and he has no doubt there will be retaliatory tariffs to increase the price of American steel coming to Canada.
Martin explained that the reason for the retaliatory tariffs is that if the U.S. market can no longer be entered, the world will start looking at different markets to unload excess production.
He said this leads to “dumping,” or selling the product abroad for less than it would be sold at home, and the world will be moving to protect themselves from “dumping.”
If the tariffs do go ahead, Martin believes we will see a tit-for-tat escalation around the world that will increase inflation, and Saskatchewan will not be immune.
Martin felt the impact of steel tariffs could be widespread, and the example he gave was farm machinery. Manufacturers import steel for some of their products, and when prices go up, this leaves less money in the pockets of farmers worldwide to buy Saskatchewan and Canadian-made farm machinery.
"You see how these things start to spiral and stack up one on top of the other. So, it's not a happy experience. Will it bring the economy down? No. But we will feel some pain from it, no question,” Martin commented.
When it comes to the manufacturing side, Martin said you would be hard-pressed to find anything that doesn’t use steel in some way, and it’s difficult to identify the source of origin of steel.
In particular, he’s interested in seeing what happens in the automotive sector, as steel parts move back and forth across the border.
"The automotive industry is really interesting because they are so integrated. Parts will be assembled in Detroit, shipped across to Windsor, and back to Detroit,” Martin said.
“If it goes back two or three times, I haven't really figured this out, but are they going to be subject to 25, 25, 25, 25 per cent? Is it going to double the price of the components going into a car? If it does, that’s certainly going to affect anybody who retails them, anybody who repairs them, and anybody who drives one. That's really going to be a widespread impact."
On the service side, Martin pointed to school buses, which are part of the automotive industry. If schools are renewing buses that go up by 25, 50 or 75 per cent, the cost could be passed down to the taxpayer.
But will these steel tariffs actually go ahead? Martin pointed to the recent widespread tariff threats in which the president got concessions from Canada and Mexico without a penny of tariffs.
“Maybe this is just posturing too, who knows? Will these things actually go into effect? It’s certainly empowered himself to do that,” said Martin.
“He's signed all the executive orders required, but we’ve had countries responding to the threat of tariffs, and they haven’t actually been imposed yet."
Martin further pointed to evidence within the stock markets, as the markets haven’t moved much, waiting to see what happens.
Right now, Martin said, we should be getting prepared. As a consumer, it means firing up nationalism and buying Canadian. Meanwhile, the message he’s delivering to businesses is to start looking at other markets.
"It's easy to sell in the U.S. because culturally we are the same, there are a lot of the same business practices, and the product lines have a lot of commonalities. If you start going around the world, you get into different customs and practices. You have to learn a little bit about that,” said Martin.
He recommended that businesses consider trade missions, pointing out that Saskatchewan is well set up with trade offices around the world, which businesses may want to tap into.
As for breaking down interprovincial trade barriers, Martin feels it is just “lip service,” and it isn’t a serious conversation. He said the biggest interprovincial trade barrier is supply management, and politicians are talking about protecting it and not dismantling it.