Five Reasons the Collapse of the Canada Trade Deal Is a Win for America

KEY FINDINGS

The jobs at stake are downstream. Fabricated products account for 97% of U.S. aluminum employment, and the two BLS categories covering aluminum sheet, plate, rolling, and extrusion together employ six times as many Americans as alumina refining and primary aluminum production. The deal’s final sticking point was whether those downstream products would be discounted to 25%, a rate at which, by CPA’s estimate, many U.S. extruders would be underwater.
National security runs on steel and aluminum. Commerce’s own Section 232 investigations found that submarines, carriers, armored vehicles, and military aircraft, whose airframes can be as much as 80% aluminum, depend on a healthy domestic industry, and since 2018 U.S. steelmakers have announced, started, or completed 21 million tonnes of new capacity behind the tariffs.
The deal would have revived an exemption regime that already failed. From 2019 to 2024, 72% of imported steel entered the United States duty-free under exemptions and quotas, Canadian shipments peaked at 6.9 million tonnes, and mill utilization remained below the 80% threshold for reinvestment for most of the period. Section 232 tariffs are national security measures, and until metal prices on both sides of the border harmonize there is nothing to discuss on fabricated goods.

The collapse of the U.S.-Canada trade negotiation on August 21 drew headlines and criticism aimed at Washington. What the criticism misses is that the deal on the table would have undercut a key plank of U.S. reindustrialization policy and a vital supply line for national security.

The terms, as reconstructed by the Globe and Mail, would have cut Section 232 tariffs on Canadian steel to 25% inside a 4-million-tonne quota and on Canadian aluminum to a flat 25%. The last dispute, by that account, was whether downstream aluminum products would share in the discount. Commerce Secretary Howard Lutnick held out for keeping them at 50%, Ottawa refused, and the talks broke off. CPA’s position, put to USTR on August 21, is that the Section 232 tariffs are national security measures, not bargaining chips. Here are five reasons the outcome is a win.

1. The jobs the deal would have traded away are downstream, and they are the ones growing

The aluminum jobs that Section 232 protects sit in fabrication, and the deal aimed its discount squarely at them. Downstream products account for 97% of U.S. aluminum employment. Aluminum rolling, drawing, and extruding employed 27,197 people in the fourth quarter of 2025, aluminum sheet, plate, and foil another 18,446, and alumina refining and primary aluminum production 7,506, according to the Bureau of Labor Statistics. The two downstream categories together employ six times as many Americans as the upstream one.

They are also the side that is growing. The Aluminum Association’s 2026 economic impact study puts primary aluminum jobs down 76% since 2013, while sheet and extrusion jobs grew 22% between 2024 and 2026, the period in which the tariffs were extended to downstream products. Steel has the same shape, and each steel job is estimated to support seven others in the economy, at average wages near $88,000, according to CPA’s November 2025 report on the Section 232 steel tariffs.

A flat 25% on finished extrusions was the term that hit these workers directly. CPA put the arithmetic to USTR on August 21: “At 50 percent, U.S. extruders can compete. At a flat 25 percent, many would be underwater.” Canada is the largest foreign supplier of extruded and fabricated aluminum products (HS 7604, 7608, and 7610) to the United States, with 126,823 tonnes in 2025, 22% of the volume and 26% of the value, according to Global Trade Tracker data. The discount would have landed on the largest foreign competitor of American extruders.

2. National security runs on steel and aluminum, and the tariffs protect the plate, sheet, and extrusion capacity that remains

The major U.S. weapons platforms are built from steel and aluminum, and the Commerce Department found domestic supply of both to be a national security requirement when it recommended Section 232. Its 2018 steel investigation found that tanks, submarines, aircraft carriers, and armored vehicles depend on specialty steels that only a healthy domestic industry can supply, and set 80% capacity utilization as the benchmark for that health. Nucor’s military plate catalogue covers HY-80 and HY-100, the submarine hull grades, and HSLA-80 and HSLA-100 for carriers and destroyers, and puts the company’s estimated capability at more than 95% of the Navy’s plate needs and all of the Army’s. Cleveland-Cliffs’ Coatesville works, which supplied plate for the USS Nautilus and the Nimitz-class carriers, rolls plate to 28 inches thick.

Aluminum’s defense role runs from the fleet to the flight line. Commerce’s Section 232 aluminum investigation found that “the airframe of a military aircraft can be as much as 80 percent aluminum by weight.” It identified extrusions in cage armor and the Navy’s Expeditionary Fast Transport and Littoral Combat Ship classes among the largest military users of the metal. It also issued a warning: only one U.S. smelter, Century’s Hawesville, Kentucky plant, produced the high-purity aluminum used in armor plate and in upgrades to the F-18, F-35, and C-17, and “should this one U.S. smelter close, the U.S. would be left without an adequate domestic supplier for key national security needs.” Hawesville was idled in 2022 and sold in February 2026 to a data-center developer.

With Hawesville gone, the mills and extruders that convert imported and recycled metal into defense-grade products are the capacity that remains. Kaiser Aluminum describes itself as “one of the few remaining United States based aluminum semi-fabricated producers that supply the American defense industry.” The Pentagon’s specialty-metals rule covers certain steels, nickel and cobalt alloys, titanium, and zirconium, and leaves aluminum out, and no antidumping or countervailing duty order covers Canadian extrusions, since Canada was not among the 14 countries in the 2023-24 extrusions case. For Canadian extrusions that qualify under USMCA and so pay no ordinary customs duty, Section 232 is the only tariff that stands between them and that capacity.

The tariffs have given the steel base room to invest. Since 2018, U.S. steelmakers have announced, started, or completed 21 million tonnes of new and expanded capacity, including the operating flat-rolled mills at Sinton, Texas and Osceola, Arkansas and Nucor’s $1.7 billion Brandenburg, Kentucky plate mill, which rolled its first plate in December 2022. CPA’s recommendation for the sector, integrated and electric-arc mills alike, is the same one: 50% coverage with no carve-outs, so that domestic orders for defense plate, sheet, and bar stay bankable and the investment already made is not stranded.

Aluminum needs the same signal: the 750,000-tonne smelter that Century and Emirates Global Aluminium agreed in January to develop at Inola, Oklahoma, the first new U.S. smelter since 1980 if built, would sell to the same domestic mills and extruders the deal was about to discount.

3. Discounting finished goods would have turned the metal tariff into an offshoring plan

Metal costs more in the United States than in Canada, and by Alcoa’s account much of that gap is the tariff itself, which is why a 25% rate on finished goods would have been an arbitrage rather than a concession. Alcoa’s 2025 annual report states that the Midwest premium, the U.S. price paid on top of the world benchmark, rose 211% last year “largely reflecting U.S. Section 232 tariffs on aluminum imports from Canada,” and that at recent levels “tariff costs on U.S. imports of aluminum from Canada are fully covered by the Midwest premium.” Cut the tariff on the finished extrusion to 25% while the U.S. extruder’s billet still carries the cost of a 50% tariff through that premium, and the imported product starts with a metal-cost advantage before either plant runs a press. The term for this is tariff inversion. CPA’s companion analysis works through the arithmetic product by product on a landed-cost basis; this article does not repeat it.

Barry Zekelman, whose Zekelman Industries is the largest independent pipe and tube maker in North America, described the mechanism at the Tampa Steel Conference in February: pipe assessed as a derivative on its steel content paid $200 to $250 in duty where a $1,200 pipe had previously paid $600, and Mexican tube mills buying cheaper coil took the orders. In April the White House fixed it: the tariff now applies to the full price of the pipe. The Canada deal would have opened the same gap for aluminum.

Steel shows the same gap, and the reason is policy. Canadian prices “practically disconnected” from American ones for most of the past year, according to Steel Market Update, while Canadian governments put public money behind their mills: C$420 million for Algoma and nearly C$900 million for ArcelorMittal Dofasco’s upgrades, according to CPA’s steel report, plus C$255 million in government loans drawn by Algoma in the first half of 2026, a company that calls itself “Canada’s only producer of discrete plate.” A 25% rate inside a 4-million-tonne quota would have opened the U.S. plate market to that subsidized capacity. Until metal prices on both sides of the border harmonize, there is nothing to discuss on fabricated goods.

4. Washington already ran the exemption experiment, and it failed

A 4-million-tonne quota at 25% would revive the logic of the 2019 Canadian exemption, and CPA’s steel report traces much of Section 232’s underperformance over the following five years to that exemption era. After Canada and Mexico were exempted in May 2019 and quota arrangements followed for the EU, Japan, and the UK, 72% of steel imported into the United States between 2019 and 2024 entered duty-free, and the average effective tariff fell from 18% to between 4% and 5%, and imports from Canada climbed to 6.9 million tonnes in 2023, according to the report.

Utilization tracked the exemptions: 82% in October 2018 on the Federal Reserve’s measure, then mostly low 70s from 2022 through 2024, below the 80% that Commerce identifies as the floor for reinvestment.

The February 2025 proclamations on steel and aluminum ended the country exemptions and quota arrangements, shut the product-exclusion process, and extended coverage to derivative products, and a June proclamation raised the rate to 50%. Steel imports from Canada fell 31% in 2025, according to the American Iron and Steel Institute, and utilization has recovered to 75% on the Federal Reserve’s monthly measure for July and to 80.0% on AISI’s weekly measure for the week ending August 22, still short of the 2018 peak.

Aluminum shows the same response. U.S. imports of extruded and fabricated aluminum products from Canada fell 18% in 2025 and 27% in the first half of 2026 against the same months a year earlier, on Global Trade Tracker data. The exemption years coincided with falling utilization and rising import share, and full coverage has coincided with the reverse. That is the record the quota proposal ignored.

5. Canada's back door to Chinese metal is open, and closing it on paper would change nothing

Canada’s own steel market runs on imports, and the United States asked Canada to close the door as part of the deal. Canadian mills produced 12.0 million tonnes in 2024 and shipped about half of it south, while imports supplied 60% of the 13.8 million tonnes Canada consumed, according to the Prime Minister’s Office. Imports that take Canadian mills’ home-market sales push them toward export, and their principal export market is the United States.

Chinese steel is a growing part of that import flow. Chinese steel imports into Canada nearly doubled between 2020 and 2024, from 356,914 to 689,734 tonnes, according to the regulatory impact statement Ottawa published with its 2025 surtax, and China supplied at least half of Canadian imports in 82 product categories, up from 26 in 2020. Catherine Cobden, president of the Canadian Steel Producers Association, put it this way in February 2025: “We’re doing a better job helping the U.S. protect their market than what we’re doing in Canada domestically, which is a problem.”

Ottawa moved late and then moved backward. It imposed its own 25% surtax on Chinese steel and aluminum only in October 2024, six years after Section 232, and in January 2026 the Carney government expanded the carve-outs from those surtaxes in a deal with Beijing.

The enforcement record explains why the United States wanted more than assurances. In May, a Brampton, Ontario steel trader and its owner paid $19 million to settle allegations that from May 2019 through January 2025 they declared flat-rolled steel from China, Vietnam, Turkey, Italy, and Indonesia as Canadian or American, beginning the month the two governments adopted their anti-transshipment commitments; the claims were allegations only, with no determination of liability. This month the White House listed Canada, alongside Mexico, in the top tier of what it called China’s “shadow transshipment network.”

Canada’s own aluminum data carry a warning sign of the same kind. Shipments of extruded and fabricated aluminum products from countries other than China and the United States rose 18% in 2025 to 79,234 tonnes, led by Malaysia, Vietnam, Türkiye, the UAE, Indonesia, and Thailand, while shipments from China fell 20% and from the United States 19%. Trade data cannot show where that metal was smelted. Malaysia, Vietnam, Indonesia, and Thailand are among the corridors that CPA’s China Transshipment Monitor tracks for diverted Chinese goods, and the monitor covers electronics and machinery rather than metals, so the overlap warrants scrutiny, nothing more.

The United Kingdom shows what closing the door looks like. Under Proclamation 11021, the UK holds a 25% rate only for steel “melted and poured in the United Kingdom” and aluminum smelted or cast there, pending further terms on supply-chain security and the ownership of its mills. On July 16 the British government nationalized British Steel, acquiring the stake of its Chinese owner, Jingye, a domestic decision that bears on the ownership question the proclamation raised. When U.S. negotiators asked Canada to mirror American restrictions on third countries, a White House official cited the UK language as the model, Politico reported. Prime Minister Carney called the request “a power play” and “a question of sovereignty.”

A rule of origin or a Canadian tariff on Chinese steel would not, on its own, close the price gap or show that Canadian metal is priced like American metal, which is why the answer to an open back door is a price test rather than a promise. A country whose metal is this much cheaper, and whose door to Chinese supply is this far open, has not earned a front-door discount on the products made from it.

What a real deal would require

Price harmonization would have to come before any future discussion of Canadian fabricated goods. Harmonization is a like-for-like test: the all-in, delivered cost of the same metal, in the same form, at the same delivery point, compared over a sustained period. Meeting it would commit the United States to nothing; the 50% Section 232 rate is a national security measure and stays. Beyond that threshold, the terms the United Kingdom has accepted show what a credible offer looks like: mirrored restrictions on Chinese metal, melt-and-pour and smelt-and-cast chain of custody on every entry, and the same scrutiny of Chinese ownership in the mills that ship south that Proclamation 11021 applies to Britain’s. CPA’s August 6 recommendations to Treasury and USTR already cover both neighbors: “Reject all Canada and Mexico downstream tariff exemptions, including for extrusions, tubing, structures, and other fabricated aluminum goods,” and treat rules of origin “as enforcement tools, not tariff substitutes.”

No deal was the better deal. The tariffs behind U.S. plate, sheet, and extrusion production are intact, and keeping them intact was the point.

The latest CPA news and updates, delivered every Friday.

NEWSLETTER

CPA ADVOCACY ISSUES