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Tariffs against Canada, Mexico, EU stir concern in Northland

Framed by another elevated rail line, two locomotives move ore cars onto Duluth’s ore docks. (News Tribune file photo)

Tariffs against steel and aluminum imports from Canada, Mexico and the European Union will take effect Friday, stirring concerns about a possible trade war and the impact it could have on the regional economy of the Northland.

Canada and Mexico are Minnesota's top two trading partners — with the former accounting for more than $6.1 billion in exports and the latter spending more than $2.4 billion on Minnesota goods and products.

Canada also is a major market for Iron Range taconite. Canadian steel mills purchased $341 million worth of pellets in 2017, according to the U.S. Census Bureau.

It should perhaps come as no surprise then that the United Steelworkers union, which has been an enthusiastic proponent of U.S. tariffs against steel imported from other countries, came out with a statement strongly opposed to sanctions against Canadian steel.

"This decision is unacceptable and calls into serious question the design and direction of the administration's trade policy," read a statement issued by the USW Thursday.

It went on to say: "The decision not to exempt Canada ignores the fact that Canada's steel and aluminum exports to the United States are fairly traded and that Canada has shown its willingness to strengthen our manufacturing base, increase employment and enhance our national security."

But others in the industry applauded the decision by President Donald Trump's administration to extend sanctions against imported steel to Canada, Mexico and the European Union.

"We stand very firmly with the president on this move," said Kelsey Johnson, president of the Iron Mining Association of Minnesota.

"We know full well that there are cheater nations out there that are cheating the system, and they've been going around the tariffs that have been imposed," she said.

"It's a tough situation, because if suddenly Canada is importing Chinese steel and sending it to the U.S., that's a real problem for U.S. steel-making and iron-mining facilities," said Johnson, noting that the position of the USW is complicated by the fact that it represents many Canadian steelworkers, as well as U.S. members.

Shipping

Imported steel accounts for less than about 3 percent of the total tonnage handled by the Twin Ports and any shipments of foreign aluminum are nominal, said Adele Yorde, public relations director for the Duluth Seaway Port Authority.

Yet Yorde noted that Canada remains the port's largest foreign trading partner. On average, she said that Canadian lakers account for 20 to 30 percent of the vessel traffic in and out of the Twin Ports.

The Twin Ports regularly load grain onto Canadian lakers and Yorde said last year 35 percent of the taconite that moved through the port was bound for Canada, for use there or transshipment through the St. Lawrence Seaway.

"How Canada and the EU respond may have some long-term impacts on Great Lakes ports," she said.

Canada was quick to retaliate by issuing a list of U.S. products it would place tariffs on in response to the U.S. sanctions. Items on that wide-ranging list included a number of steel products, yogurt, candies, soy sauce, soup, whiskey, "hair lacquers," aftershave, dishwasher detergent, toilet paper, beer kegs, outboard motors, mowers, kitchen appliances, ball-point pens and sleeping bags.

But Johnson said taconite pellets were not on the list, at least yet.

Yorde said it's tough to predict what the impact of the latest tariffs will be.

"We understand why a push for tariffs on foreign steel dumping was initiated in the first place, in terms of domestic iron ore and steel production, and this port factors heavily in that. But we also handle a variety of other cargoes, so reciprocal tariffs and trade wars could impact a lot of orders for U.S. commodities, particularly agricultural exports," she said.

Collateral damage

Bruce Abbe, executive director of the Midwest Shippers Association, noted that the U.S. actually enjoys a trade surplus with Canada at present.

"And Mexico is a huge concern to us ag exporters because that has become a major market for us as well," he said. "And Europe is our long-time trading partner."

Abbe described a confusing trade scene.

"It's just another ramp-up of unpredictability from the U.S. side in terms of what we're doing, and that makes us ag exporters in the U.S. pretty nervous," he said.

Abbe said his association and other organizations have worked hard to promote U.S. products in other countries.

"We've sought to really convince the rest of the world that the U.S. is the most reliable supplier they can find," he said. "So it's very worrisome when we get into these unpredictable kinds of actions that almost invite or guarantee retaliation by the other sides. So it's concerning," he said.

Even if the tariffs against Mexico and Canada are part of a short-term U.S. strategy to advance its interests in ongoing talks to revise the North American Free Trade Agreement, Abbe said the effects of any trade disruptions are likely to be longer-lasting.

While Johnson supports the Trump administration's expansion of tariffs, she, too, hopes better solutions will emerge shortly.

"Canada is a strong trading partner with us on a variety of different products. So I think at the end of the day, we need to remain united as a North American economy and find ways to work cooperatively together," Johnson said.