Negotiators are reported to have settled on halving Section 232 metals duties for Canada, but a volume cap near four million tonnes and unresolved treatment of derivatives mean the relief will be narrower than the headline number suggests
HAMILTON, Ontario, August 21, 2026 – The single most consequential number in the Canada-United States trade package now being finalized in Washington is not the 50 per cent Section 338 tariff that dominated this week’s headlines. It is 25, the rate that people familiar with the talks say American negotiators have agreed to apply to Canadian steel and aluminum, down from the 50 per cent Section 232 duty that has been in place since last year.
Bloomberg News reported on August 19 that the tentative agreement would lower duties on certain Canadian exports of the two metals to 25 per cent, citing people familiar with the matter who spoke on condition of anonymity because terms had not been announced. The same reporting carried two qualifications that industry executives have been parsing ever since: the reduction is not expected to apply across the board, and different rates could apply to some derivative products containing those metals.
A second element, reported by The Globe and Mail, is the return of a quota architecture. Negotiators have revived a proposal under which Canadian steel and aluminum shipments would be subject to a volume ceiling in exchange for the lower rate, with the steel quota understood to be set near four million metric tonnes a year. Volumes above the ceiling would revert to the original 50 per cent rate.
Neither government has confirmed any of it. The White House, the Office of the United States Trade Representative and the Prime Minister’s Office did not immediately respond to Bloomberg’s requests for comment on August 19. Multiple sources told CTV News on Thursday that sectoral tariff reductions are part of the agreement but that none of them knew the scope.
Relief measured against a very low base
Catherine Cobden, president and chief executive of the Canadian Steel Producers Association, said she listened to the announcement of the pause “with relief,” adding that “it’s certainly a much better place than where we were yesterday.”
That formulation captures the sector’s position precisely. A 25 per cent tariff is not an outcome any Canadian producer would have accepted in 2024. It is an improvement on 50 per cent, and 50 per cent has been an extinction-level rate for cross-border steel trade.
William Pellerin, an international trade lawyer, told CTV News Channel on Thursday that a reduction in Section 232 duties would be “extremely important” for sectors that have been “really suffering.” He went further, arguing that the relative position matters as much as the absolute one. “If we can regain access to the United States market, our producers are going to be in a much better place, and might even have a competitive advantage compared with the rest of the world,” he said.
That argument depends entirely on what other suppliers face. If Canada lands at 25 per cent while offshore producers remain at 50, Canadian mills recover a preference in the American market they have not enjoyed since the Section 232 rate was doubled. If the American administration extends similar terms to other partners, the preference evaporates and Canadian producers are left with a 25 per cent cost disadvantage against domestic United States mills and no offsetting advantage against anyone else.
The Conservative opposition has already staked out the position that 25 per cent is a defeat. House Leader Andrew Scheer told CTV Your Morning Saskatchewan on Thursday that the central question is whether the Prime Minister returns with zero tariffs or a 25 per cent baseline. “If he comes back with a deal where there’s still 25 per cent tariffs on steel and aluminum, there’s going to be a lot of workers here in Regina and across the country that will be scratching their heads, saying, you know, Mark Carney seems to have given up quite a lot,” Scheer said. He also repeated Conservative Leader Pierre Poilievre’s complaint that the government has not briefed the Opposition on the negotiations.
Manitoba Premier Wab Kinew, speaking to Winnipeg radio station 680 CJOB on Thursday, gave the most specific plant-level read available. He said it appears there will be a lower tariff applied to the Gerdau mill in Selkirk, Manitoba, while cautioning that the rate remains “way higher than it was two years ago.”
Saskatchewan Premier Scott Moe said Wednesday he hopes the two countries can agree on reductions covering steel, aluminum, autos and lumber. British Columbia Premier David Eby said no agreement would deliver everything Canada wanted but credited Ottawa with substantial progress across strategic sectors.
Why aluminum is a different problem from steel
The two metals are routinely bracketed together in tariff announcements. Commercially they behave nothing alike, and the difference explains why the American side is under more internal pressure on aluminum than on steel.
Canada is the largest single source of United States aluminum imports, and Canadian supply accounts for roughly half of total American aluminum consumption. The United States does not have the domestic smelting capacity to meet its own demand and cannot build it quickly, because primary aluminum smelting is a function of long-lived capital and cheap electricity, both of which take years to assemble. The practical consequence, as Bloomberg noted, is that the cost of aluminum tariffs has been passed on almost in its entirety to American buyers. A duty on Canadian aluminum functions much more like a domestic excise tax on American manufacturing than like a barrier protecting American production.
That is why the fight inside Washington over aluminum is not primarily between American and Canadian producers. It is between American smelting interests and American downstream fabricators.
The Coalition for a Prosperous America, a manufacturing advocacy group that has generally supported tariffs, and other stakeholders have lobbied the administration to pair any aluminum tariff reduction with traceability requirements. The stated concern is that a simple rate cut would benefit metal entering the United States without adequate origin verification, and would leave American fabrication, which constitutes the bulk of the domestic aluminum industry by employment, exposed. The coalition and allied groups have put approximately 125,000 American jobs in aluminum rolling, drawing and extruding at risk in their advocacy.
Bloomberg reported that administration officials are under pressure to avoid applying a reduced rate uniformly across steel and aluminum imports from Canada. That pressure is the most plausible explanation for the reporting that different rates could apply to derivative products.
For Canadian exporters, derivative treatment is where a headline number becomes a spreadsheet problem. The Section 232 derivative lists have expanded repeatedly since 2020 and now capture a wide range of fabricated articles in which steel or aluminum content is only part of the value. If primary metal moves to 25 per cent while derivatives stay at 50, the effect is to push Canadian value-added fabrication out of the American market while preserving Canada’s role as a supplier of unfinished inputs. That is precisely the outcome Canadian industrial policy has spent decades trying to avoid.
The quota question
The revived quota proposal deserves closer attention than it has received.
Under the reported structure, Canadian steel shipments up to a ceiling in the neighbourhood of four million metric tonnes annually would enter at 25 per cent, and volumes beyond that would face the original 50 per cent. Canada’s steel exports to the United States have historically run in the range of five to six million tonnes in strong years, so a four-million-tonne ceiling is a real constraint rather than a nominal one.
Quota regimes of this kind create administrative questions that matter as much as the headline volume. Among them: whether the quota is allocated on a first-come, first-served basis at the border or distributed among named producers; whether it is administered quarterly or annually, which determines whether a single strong quarter can exhaust a year’s allocation; whether unused volume carries forward; whether the quota is expressed in tonnage or value; and how it interacts with the derivative lists.
The European Union’s experience with tariff-rate quota administration is instructive on the hazards. Quarterly quota mechanics there have repeatedly produced episodes in which allocations exhaust within days of opening, leaving importers to choose between paying the over-quota rate and idling shipments until the next period. Whichever mechanism the two governments adopt will determine whether four million tonnes functions as a meaningful entitlement or as a queue.
There is also a diversion question. Canada has spent the past year building defences against steel entering its own market from third countries displaced by American tariffs. Ottawa announced measures in 2025 to curb non-United States steel imports as domestic producers signalled distress, and on June 3, 2026 the Department of Finance announced its intention, subject to Governor in Council approval, to extend key steel and aluminum tariff measures for a further year. Canadian producers have been publicly critical of the extension of remission programs that allow duty-free entry of some foreign steel, arguing that such relief undermines the protective architecture.
If the American quota binds, Canadian mills producing above the ceiling must find alternative markets or curtail output. Neither option is attractive in a market where global overcapacity is the defining structural condition.
How the metals tariffs got here
The current 50 per cent rate is the product of a two-step escalation rather than a single decision, and the sequence matters for understanding why a reduction to 25 per cent is being characterized in Ottawa as a restoration rather than a concession.
Section 232 of the Trade Expansion Act of 1962 authorizes the President to adjust imports where the Secretary of Commerce finds that they threaten to impair national security. Steel and aluminum duties were first imposed under that authority in 2018 at 25 per cent and 10 per cent respectively. Canada was exempted, then subjected, then exempted again following the conclusion of CUSMA. The tariffs were reimposed on Canadian metals in the current administration and subsequently doubled to 50 per cent, a level that exceeds the gross margin available on most commodity grades and effectively closed the trade for anything other than product with no American substitute.
Several close United States trading partners negotiated arrangements capping sectoral duties in exchange for trade concessions. Canada, despite proximity, integration and the largest bilateral metals relationship the United States has, did not secure such an arrangement, which is why Ottawa entered this week’s talks with steel as its declared first priority and autos as its second.
The doubling to 50 per cent also produced a second-order effect inside Canada. Metal that would have moved south was redirected into the Canadian market, and metal displaced from the American market by tariffs on third countries sought Canadian buyers. Ottawa responded with import measures aimed at non-United States steel, and Prime Minister Carney committed publicly to curbing offshore steel imports as domestic producers signalled distress. The Canadian Steel Producers Association has argued that those measures were undercut by the parallel extension of remission programs permitting duty-free entry for some foreign steel, a position the association restated when the extensions were announced.
The June 3, 2026 announcement by the Department of Finance that Canada intends to extend key steel and aluminum tariff measures for one year, subject to Governor in Council approval, keeps that domestic architecture in place regardless of what is agreed with Washington. A Canadian producer therefore faces two distinct tariff environments simultaneously: an American one now possibly moving to 25 per cent under quota, and a Canadian one designed to keep offshore metal out of the home market.
The downstream problem
Most commentary on metals tariffs concentrates on producers. The larger employment and output effects sit downstream, among the fabricators, stampers, extruders, structural steel firms and equipment manufacturers that buy metal as an input.
For Canadian downstream manufacturers, the relevant number is not the tariff on primary metal but the tariff on the article they actually ship. Under the Section 338 proclamations, the Section 232 carve-out excluded steel, aluminum, copper and their derivatives from the 50 per cent Section 338 duty. But the motor vehicle annex reached machinery and electrical equipment in Chapters 84 and 85, including refrigerating equipment, filtering and purifying machinery parts, filling and sealing machinery, and mixing, grinding and screening machinery. Many of those articles are metal-intensive and are produced by firms that also buy tariffed metal.
The result over the past year has been a compounding cost structure. A Canadian equipment manufacturer buying domestic steel has paid prices elevated by trade defence measures on offshore supply, and has then faced tariffs on the finished machine crossing into the United States. A reduction in the primary metal rate does nothing for that firm unless the treatment of its finished product also changes.
This is why the derivative question, which reads as a technical footnote in the Bloomberg reporting, is the element Canadian industrial associations will examine first when terms are published. A settlement that lowers the rate on ingot, billet, slab and coil while leaving derivatives at 50 per cent would formalize a division of labour in which Canada supplies inputs and the United States captures fabrication. Two decades of Canadian manufacturing policy have been directed at preventing exactly that.
The macro picture
The two countries traded roughly US$900 billion in goods and services last year, according to Bloomberg’s tally, a relationship that has come under sustained strain through the President’s second term.
Canadian steel and aluminum have been at the centre of that strain since the Section 232 rate was raised to 50 per cent. The Canadian federal government has responded with a series of support measures, including a support package for the steel and aluminum sectors announced in 2025 and the June 2026 extension of protective measures. Producers have argued consistently that the support is insufficient relative to the scale of the disruption, and that Ottawa’s simultaneous extension of remission relief for imported steel works against the stated objective.
Employment concentration sharpens the politics. Steel and aluminum production in Canada is geographically clustered in Hamilton and Sault Ste. Marie in Ontario, in the Saguenay region of Quebec, in Selkirk, Manitoba and in Regina, Saskatchewan. Each of those is a community where a single facility is the dominant private employer, which is why premiers from four provinces have spoken publicly on the metals file this week while saying little about the broader package.
That concentration is also why CTV News sources described the sectoral numbers as the element that will “make or break the deal” politically for the Prime Minister. A 25 per cent rate is defensible as a negotiated improvement in Ottawa and Toronto. It is a harder sell in a mill town.
Implications for importers, exporters and Canadian business
For firms on either side of the border, several practical points follow from what is currently known.
The Section 232 carve-out from the Section 338 duties means that steel, aluminum, copper and their derivatives, along with vehicles and parts, specified wood products, semiconductors and patented pharmaceuticals, were never exposed to the 50 per cent Section 338 rate. Metals firms watching this week’s brinkmanship were watching a different tariff from the one that governs their own shipments. The metals question is settled, if it is settled, through Section 232, not Section 338.
Classification at the derivative boundary is now the highest-value compliance exercise available to a Canadian metals exporter. If the final instrument applies 25 per cent to primary and semi-finished metal and a different rate to derivatives, the margin difference between two adjacent HTSUS lines could exceed the gross margin on the product. Firms should be running that analysis before terms are published, not after.
Contract language needs revisiting on the assumption of change in both directions. Most Canadian supply agreements written since 2025 allocate the risk of a tariff increase. Fewer address what happens when a tariff falls, which raises the question of who captures the benefit of a reduction from 50 to 25 per cent. Where a contract prices in a 50 per cent duty as a pass-through, a reduction may accrue entirely to the buyer unless the agreement says otherwise.
Quota positioning will matter if the reported structure holds. Under most quota administration models, early-year shipments have an advantage. Exporters who can pull volume forward should be modelling that now.
Finally, the reversibility point applies here as much as it does to Section 338. Section 232 duties are set by presidential proclamation and can be adjusted by the same instrument. A rate agreed this week is a rate that can be revisited. Kinew put the risk-management proposition in blunt terms when discussing a different part of the package, saying that Canada should “reserve the right” to reverse course “because we know that this guy is very erratic.”
Diversification is the strategic response, and it is being articulated more explicitly than at any point in the dispute. Nova Scotia Premier Tim Houston, speaking from an energy conference in Banff, said the trade dispute “has taught us something really important about diversification and pushing Nova Scotian opportunities,” listing seafood, agriculture and energy as sectors where alternative markets need building. For metals, diversification is harder than for seafood, because the freight economics of steel favour proximity and because the American market is simply the largest one within reach. That structural reality is the reason 25 per cent may end up being accepted in Ottawa despite the political cost.
Trade Minister Dominic LeBlanc and Chief Negotiator Janice Charette were still in Washington as of Thursday afternoon. Whatever emerges will be read first, and most closely, in the mill towns.