How do recent trade policies and tariffs between Canada, the US, EU, and China affect Canadian aluminium exports?
Executive summary
Canada’s aluminium exporters are being squeezed and rerouted by a web of new tariffs and surtaxes: U.S. import duties have made sales to the United States markedly more expensive and less profitable, prompting substantial diversion of Canadian metal to Europe and other markets, while reciprocal and parallel measures by Canada and the EU complicate routing and raise risks of trade retaliation that could shrink volumes and raise prices across markets [1] [2] [3] [4]. Policy responses and mitigation tools — from Canadian surtaxes on Chinese metal to industry financing supports — blunt but do not eliminate the damage: evidence from past tariff episodes and early 2025–2026 trade flows point to lost exports, higher premiums, reduced U.S. stocks, and deadweight losses for both exporters and importers [5] [6] [7] [4].
1. How U.S. tariffs re-priced Canada’s nearest market and redirected flows
The U.S. imposed stepped-up tariffs on steel and aluminium imports—first 25% and then higher levies—making Canadian metal substantially more expensive to U.S. buyers and prompting producers to pull discretionary shipments out of the U.S. market; the effect was immediate enough that Canada’s share of Quebec aluminum exports to the U.S. fell from 95% to 78% between Q1 and Q2, while Europe’s share rose from 0.2% to 18% as firms sought alternatives [1] [2] [3]. Traders and producers report rerouting primary metal not bound by long-term contracts to Europe and elsewhere, a shift that squeezed U.S. inventories and helped push U.S. premiums to record highs even as those premiums still failed to fully offset tariff costs for some suppliers [1] [6].
2. Europe’s role as an overflow valve — and the political backlash it invites
European buyers absorbed a surge of Canadian metal in 2025, depressing some regional premiums and triggering EU trade surveillance and the threat of export restrictions as Brussels worries about diversion and distortions to its market [1] [8]. This welcome market for Canadian product is nevertheless fragile: commentators warn a “redirection scenario” where shifts in flows alter global pricing and invite policy responses, and the EU’s activation of surveillance demonstrates the political sensitivity of suddenly large Canadian shipments into a previously small trade corridor [8] [1].
3. Canada’s own measures and the China dimension complicate export economics
Canada has enacted surtaxes on Chinese-origin aluminium and expanded import controls aimed at preventing Chinese-made metal from being trans-shipped through third countries, part of a strategy to protect domestic producers and align with U.S. moves — but matching U.S. measures risks reciprocal actions by China against Canadian exports and could limit access to a major growth market for Canadian metal [9] [10]. Legal and administrative mechanisms such as tariff-rate quotas (TRQs) and reverse onus verification are being discussed and implemented, which raises compliance costs for exporters and importers and can slow trade even where tariffs do not directly apply [10].
4. Measurable economic impacts: prices, volumes and deadweight loss
Historical and contemporary analyses show tariffs are largely passed through into higher import prices and lower trade volumes; StatCan work and academic literature on the 2018–19 U.S. tariffs indicate substantial, persistent declines in value and volume for tariffed steel and aluminium—and early 2025–2026 data show similar responsiveness as shipments fall and reroute, creating deadweight losses for both Canadian exporters and U.S. importers [5] [7]. The immediate market outcome has been lower U.S. stocks and higher U.S. premiums, upward pressure on global prices in some venues, and localized price declines in Europe where redirected Canadian flows arrived [6] [8].
5. Industry and government mitigation — relief, but not a full fix
Canadian export-credit and trade-support programs have been mobilized to help firms find new buyers and manage financing amid tariff uncertainty, and law firms and trade advisers offer compliance pathways, yet these measures address symptoms (cash flow, market intelligence) more than the structural loss of an integrated North American market; analysts warn that unless tariffs are rolled back or carve-outs negotiated, some trade will permanently atrophy and contractual patterns may change in ways that are hard to reverse [4] [11] [7]. Alternative viewpoints persist: U.S. industry and policymakers argue tariffs protect domestic producers from unfair competition and overcapacity [4] [9], while Canadian and business groups emphasize harms to supply chains and manufacturers reliant on integrated continental trade [12].
6. Outlook and reporting limits
Available reporting through early 2026 documents clear short-term rerouting, higher trading costs, and policy churn across Canada, the U.S., the EU and China; however, longer-term quantitative impacts on Canadian output, contract renegotiations, and global market structure remain uncertain in the sources provided and will depend on whether tariffs persist, are narrowed by carve-outs, or provoke retaliatory measures from trading partners [1] [9] [5].