Canadian steelmakers offset some US tariff pain with domestic demand

TORONTO, Oct 16 (Reuters) - Canada's steel industry, among the sectors hit first and hardest by US President Donald Trump's tariffs, is starting to turn a corner thanks to an uptick in mining, energy and AI data center projects as ?well as government support, although the impact has not been even across the country.

While Canada is a small producer globally and steel contributes less than 1% to national GDP, it ‌is one sector in which Prime Minister Mark Carney's efforts to make Canada's economy less reliant on the United States appear to be having some success, albeit with a heavy dose of government intervention.

Steel companies have been diversifying away from the US and focusing on domestic demand since Trump increased tariffs on imported steel from 25% to 50% in June 2025, steelmakers, analysts and union representatives said.

Canada used to send around 90% of its steel exports to the US, but shipments plummeted by 60% in 2025, according to ?the Canadian Steel Producers Association. Hundreds of steelworkers have been laid off.

But the share of steel used in Canada that was produced domestically rose to 51% in 2025, up from 41% in 2024, ?according to United Steelworkers, the sector's main labour union. The import share declined from 59% to 49%. USW calculated the data based on World Steel Data and ?Canada’s imported steel data, said Guio Jacinto, an economic researcher for the union.

The green shoots are mostly appearing in western Canada, where some large industrial projects including a 1.2 gigawatt data center in Saskatchewan are under construction. ?Carney said a new oil pipeline to the Pacific Coast would also boost demand for steel.

Canadian steel demand is estimated to have grown around 2.7% in 2025 and is projected to increase by about 0.9% in 2026, according to ?an OECD report published in July.

"What we are seeing right now is that more Canadian companies are competing for domestic market, which means there is less space for steelmakers from outside," said David Fritz of Alberta-based Supreme Steel, which manufactures fabricated steel.

"I feel optimistic for the outlook of fabricated steel market in Canada, there are enough projects in pipeline to support this industry," Fritz added.

GOVERNMENT INTERVENTION

At a time of excess global capacity, Canadian steel would struggle to compete with lower-cost producers in China and South Korea ?without import quotas. Canada produces around 13 million tonnes of primary steel annually.

In May, the federal government announced C$1 billion ($700 million) in loans to the steel, aluminum and copper industries as working capital funding to get through ?the impact of US tariffs. The government extended a cap on foreign steel coming into the country, known as tariff rate quota, to address the issue of foreign steel dumping.

Canada's adaptation to Trump's tariffs has been closely watched internationally, as Carney ‌is one ?of the few global leaders to retaliate against US tariffs despite his country’s overwhelming economic dependence on the US.

The prime minister also threatened legal action against US steel producer Cleveland-Cliffs (CLF.N), opens new tab over plans to cut hundreds of jobs at its Hamilton, Ontario, facility.