US eases tariff pressure on Canadian and Mexican metal producers

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The US Commerce Department has introduced a new process that would allow steel and aluminium producers from Canada and Mexico to apply for reduced Section 232 tariffs if they commit to investing in manufacturing operations in the United States. Under the proposal, eligible companies could see tariffs lowered from the current 50 per cent rate to 25 per cent, according to a notice filed in the Federal Register.

The initiative aims to encourage foreign metal producers to expand industrial capacity in the US while supporting North American automotive supply chains. To qualify, companies must already supply steel or aluminium, directly or indirectly, to US manufacturers of automobiles or medium- and heavy-duty vehicles. Their exports must also meet the preferential trade requirements under the United States-Mexico-Canada Agreement.

The policy follows the Trump administration’s April revision to Section 232 tariffs on steel and aluminium imports, which imposed a 50 per cent duty on products made predominantly of steel or aluminium, including steel coils and aluminium sheets.

The tariff measures have also prompted support initiatives in Canada. The Canadian government recently approved USD 1.5 billion in financial aid for aluminium, steel and copper companies affected by the new US tariffs that took effect on April 6. The package includes USD 1 billion through the Business Development Bank of Canada and another USD 500 million for smaller companies to ease cash flow pressures, protect jobs, encourage market diversification and stabilise supply chains.

To secure the lower tariff, companies must commit to building new facilities or expanding existing US operations producing primary steel or primary aluminium for the automotive sector. The Commerce Department said simple upgrades or reconfigurations of existing plants would not qualify.

The reduced tariff would apply only to volumes matching the projected annual production capacity of the planned US facility and for a fixed period set by the department.

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Applicants must submit documentation certified by a senior executive, such as a chief financial officer or general counsel, detailing existing Canadian or Mexican plants, product categories, US customers and raw material supply sources. Companies must also provide plans for the proposed US facility, including its location, objectives, development status and expected workforce expansion, along with commitments to milestones such as land acquisition, facility design completion, construction progress and the start of commercial production.