WSD Take: US-Canada Tariff Negotiations
For the time being, the US market is going to revolve around the possibility of a reduced tariff on steel and aluminum goods between the United States and Canada, reducing the tariff from the current level of 50%, in place since July 1, 2025, to a reduced level of 25%, with the possibility of a quota being put in place. This is would be first such exception the Trump administration has made with any country globally, and it happens to be with the United States’ largest trading partner. In WSD’s opinion, this will undoubtedly have an impact on the US domestic market.
Over the last two years, Canadian exports to the United States have declined from 3.4 million net tons in the first half of 2024 to a recent low of 1.5 million net tons in the first half of 2026, a 54% decline. However, it is worth noting that during the same period US exports to Canada have also declined, albeit at a lower rate. US steel product exports to Canada were 1.8 million net tons in the first half of 2024 and have since declined to 1.1 million net tons in H1 2026, down 36.7%, indicating the effect of harsh trade relations between the two countries.
In the flat rolled market, Canadian exports of steel sheet fell from 1.9million net tons in H1 2024 to 668,000 net tons in H1 2026, a reduction of 65.3%. During the same period, US sheet exports to Canada decreased from 948,000 net tons to 690,000 net tons, a reduction of 27.3%. As a result, the Canadian steel sheet surplus with the US is virtually gone, declining from a gap of 198,000 net tons in January 2024 to virtual parity as of June 2026.
In the immediate term, WSD does not expect a rapid return of Canadian exports into the US. The shutdown of capacity due to the electricity failure at Algoma is likely to keep the plant offline for two to three weeks, leaving a supply shock in the Canadian market that will likely keep excess tons from entering the United States.
In the intermediate term, by late 2026, WSD expects some resumption of Canadian tonnage into the US at the lower tariff rate. We only have recent history to work with, but average monthly sheet exports in 2024 ran 309,000 net tons per month. Following implementation of the tariffs, that fell to an average of 227,000 net tons from March 2025 to June 2025, and then declined more severely once tariffs increased to 50%, with monthly sheet exports falling to 143,000 net tons. It is therefore reasonable to expect some additional tonnage, perhaps as much as 50,000 to 75,000 tons per month, which amounts to roughly 600,000-900,000 tons annualized of additional sheet imports into the US.
There are a couple of additional market factors to be aware of here. Once the industry gets through the full maintenance schedule, the restart of US Steel’s No. 4 blast furnace at Gary Works, the continued ramp up of US Steel’s Big River 2 facility, the potential restart of the Cliffs Dearborn blast furnace, and the early 2027 startup of Nucor’s West Virginia facility, there is an increasing possibility that US supply issues resolve themselves within the next six months.
Another point to consider is whether the bilateral agreement between the US and Canada should be viewed as a one-off instance of reduced tariffs, or whether other key trading partners such as Mexico, South Korea, Japan, and European producers will seek similar remediation reducing tariffs from 50% to 25%. Those countries accounted for nearly 70% of all sheet imports into the US prior to the blanket application of Section 232, so if that is the case, the cumulative impact would be substantial. It is important to note that this is a developing story and likely to change significantly as negotiations go forward.