Steel and Aluminum Import Tariffs: Impact & Analysis on Canadian Stocks

On Sunday, February 9, 2025, U.S. President Donald Trump made a significant announcement regarding trade policies, specifically steel and aluminum imports. He revealed that he would impose a 25% tariff on all steel and aluminum imports into the U.S., in addition to the existing metals duties.

He also mentioned that he would announce reciprocal tariffs on Tuesday or Wednesday. This development could have profound implications for both U.S. and specifically Canadian markets, as well as for related Canadian stocks and sectors directly linked to trade in steel, aluminum, and related industries.

Before we dive in, we have a special offer! For a limited time, you can get 70% off Stock Target Advisor’s premium features. Claim your discount here!

General Market Impact

Below are the General Market Impact due to Trading Policies

Market Volatility:

The announcement of a new tariff on steel and aluminum imports is expected to contribute to greater volatility in both U.S. and Canadian markets. The global nature of the metals market means that the trade relationship between the U.S. and Canada is deeply intertwined, especially in the context of steel and aluminum production.

With a new round of tariffs, the uncertainty surrounding the final details and the potential for retaliatory actions from Canada and other countries could lead to market swings. Investors will be cautious about how these tariffs affect corporate earnings, trade volumes, and broader economic conditions.

Canadian stock markets could be directly affected by the changes in trade policies. An initial sell-off in response to rising tensions might be followed by a period of adjustment as investors react to more detailed tariff proposals and announcements.

Currency Fluctuations:

Given the close economic relationship between Canada and the U.S., the Canadian dollar (CAD) could experience fluctuations. A stronger U.S. dollar in the short term may make Canadian exports more expensive, potentially dampening demand for Canadian goods. This would affect Canadian exporters’ profitability and could lead to changes in the exchange rate between the Canadian dollar and U.S. dollar.

The uncertainty surrounding the broader economic impact of the tariffs could further exacerbate volatility in the foreign exchange market as investors attempt to gauge the longer-term consequences for Canadian trade relations and overall economic stability.

Read More: China Tariffs Hit USA Stocks, Which Companies Are Most at Risk?

Specific Impact on Canadian Sectors and Stocks

Several sectors in Canada will be directly affected by the new tariffs, particularly industries reliant on steel and aluminum imports, such as manufacturing, automotive, and mining. Below is a breakdown of the key Canadian stocks and sectors that could be influenced by these new trade barriers.

Steel and Aluminum Producers

Canadian steel and aluminum manufacturers are on the front line when it comes to the impact of these tariffs. Companies like Stelco Holdings Inc. (STLC) and Algoma Steel Group Inc. (ASTL) may face challenges, as their ability to export products to the U.S. could be constrained by the additional 25% tariffs.

• Stelco Holdings Inc. (STLC): Stelco, a major Canadian steel manufacturer, exports a significant portion of its products to the U.S. The new tariffs could reduce demand for its steel in the U.S. market, which could lead to a drop in revenue and earnings, directly affecting its stock price.
• Algoma Steel Group Inc. (ASTL:CA): Another key player in the Canadian steel industry, Algoma could face similar challenges. The additional costs due to tariffs might reduce the competitiveness of its products in the U.S. market, creating uncertainty in the short to medium term.

Automotive Industry

The Canadian automotive industry is also significantly reliant on steel and aluminum imports. Major Canadian automotive manufacturers like Magna International Inc. (MG:CA) and Linamar Corporation (LNR:CA) could experience cost increases as a result of these tariffs.

• Magna International Inc. (MG:CA): As one of the largest auto parts suppliers in North America, Magna sources steel and aluminum for its production facilities. The new tariffs could raise production costs for Magna, reducing its profitability. Given the automotive industry’s reliance on precise supply chains, manufacturers like Magna might need to reassess pricing structures and potentially pass on increased costs to consumers.
• Linamar Corporation (LNR:CA): Linamar, which designs and manufactures auto parts, could also face higher costs for raw materials. As a result, its margins might be squeezed unless the company can find alternative suppliers or renegotiate contracts with U.S. partners.

Mining and Resource Companies

Mining giants like Teck Resources Limited (TECK-B:CA) and First Quantum Minerals Ltd. (FM:CA), which are involved in the production of metals that are traded globally, might see mixed effects. These companies could be impacted by price changes in steel and aluminum, as well as disruptions in the supply of raw materials to U.S. manufacturers.

• Teck Resources Limited (TECK-B:CA): As a leading Canadian mining company, Teck might benefit from higher prices for raw materials, but the overall uncertainty around trade relations could limit these gains. Additionally, Teck’s ability to export materials to the U.S. could be impacted if U.S. manufacturers face higher costs for steel and aluminum.
• First Quantum Minerals Ltd. (FM:CA): As a major player in the global copper and gold markets, First Quantum might see some volatility in its stock due to the broader commodity market’s reaction to tariffs on metals.

Considerations & Outlook:

President Trump’s decision to impose a new round of tariffs on steel and aluminum imports is a significant development that will have far-reaching implications for both U.S. and Canadian stock markets.

The immediate effects are likely to include heightened volatility, currency fluctuations, and sector-specific challenges, especially for steel and aluminum producers, the automotive industry, and mining companies.