Stelco layoffs took effect on Sunday in defiance of an Ottawa ultimatum, turning a Hamilton idling decision into the first real test of whether Investment Canada Act commitments survive a tariff war
HAMILTON, Ontario, October 12, 2026
The first wave of layoffs at Stelco’s Hamilton Works took effect on Sunday, October 11, despite a federal ultimatum threatening legal action against the plant’s American parent, Cleveland-Cliffs, if it proceeded. Workers reported being told not to return, and the Prime Minister’s warning that the company would face the fullest extent of the law has now been tested and, for the moment, found wanting.
What began as a commercial decision about galvanised steel capacity has become the sharpest domestic test yet of Canada’s tariff-era industrial policy. At stake is whether the undertakings a foreign buyer gives under the Investment Canada Act to win approval of a takeover mean anything when the trade environment turns against the business case that justified them. The answer that emerges in Hamilton over the coming weeks will be read closely by every foreign acquirer with Canadian assets and by every community that was promised job guarantees in exchange for a sale.
How Hamilton got here
Cleveland-Cliffs, the Ohio-based integrated steel producer led by chairman and chief executive Lourenco Goncalves, acquired Stelco in 2024. As a condition of approval, the company gave legally binding commitments under the Investment Canada Act, including an undertaking to maintain at least the same number of unionised workers and most non-unionised staff for a period of five years. Those undertakings have roughly three years left to run.
On September 28, Stelco announced it would idle galvanised and cold-rolled operations, putting up to five hundred jobs at risk across two sites. Hamilton Works, which produces cold-rolled and galvanised product, carries the larger share. Lake Erie Works at Nanticoke faces a smaller reduction tied to its pickling line.
The sequence since has been rapid. Individual layoff notices began going out on Wednesday, October 7, with roughly ninety expected in that week alone. Approximately three hundred and thirty Hamilton workers are expected to be affected over a three-week period. At Lake Erie Works, forty to fifty workers could be laid off as early as October 24. Co-operative education students placed at the facilities are also affected.
Ottawa moved on October 5. Industry Minister Melanie Joly sent a letter to Stelco president Paul Simon demanding a plan setting out how Cleveland-Cliffs intends to meet its acquisition commitments, and gave the company five business days to respond. Goncalves said the company would meet the deadline by Tuesday, October 13, with two filings: a public-facing plan and a more detailed document containing commercially sensitive material, which the company maintains is protected from disclosure under the Investment Canada Act. He declined to share either.
The layoffs proceeded while that deadline was still running.
The company’s case
Goncalves has not disputed that the cuts are happening. He has argued that they are temporary and that the fault lies on the Canadian side of the negotiating table rather than with his company.
His position rests on three claims. The first is market arithmetic. He has argued that the Canadian market is too small to absorb galvanised output from both Stelco and ArcelorMittal Dofasco while also accommodating imports, and that running the affected lines at roughly half capacity is inefficient to the point of being untenable.
The second is that the layoffs are reversible. Goncalves has said workers will be recalled once a Canada-United States steel trade agreement permits galvanised production and sales to resume at volume. Asked when that might be, he said he does not know.
The third is a policy argument. Goncalves has praised the United States Section 232 steel tariffs as highly effective, crediting them with supporting the hot-rolled market, while arguing that they have not adequately protected galvanised producers. He has advocated what he calls a Fortress North America approach, under which Canada and the United States would erect shared protection against offshore imports in exchange for restored American market access for Canadian galvanised steel. He has urged Ottawa to adopt import protections similar to the American measures.
That last argument is the one Ottawa has seized on. Industry Minister Joly has rejected the contention that tariffs and market conditions release Cleveland-Cliffs from its obligations, noting pointedly that Goncalves has publicly supported the very tariffs now being cited as the cause of the layoffs. Her warning, delivered on October 8, was that the company should not support Trump’s tariffs and then characterise the resulting Stelco job cuts as an act of God. Goncalves called her comments totally unfair.
Labour is not persuaded by either side
The United Steelworkers locals representing the affected plants have been scathing, and notably have not accepted the company’s framing that this is a temporary disruption with a diplomatic solution.
Ron Wells, president of USW Local 1005 in Hamilton, has said members feel betrayed and described them as pawns in a trade dispute they did not create. He has characterised the situation as a manufactured crisis designed to extract a favourable deal from Ottawa. John McElroy, president of USW Local 8782 at Lake Erie Works, has said that many of the affected workers are the primary earners in their households and are deeply worried. The union is working with management to move some affected employees into work currently performed by outside contractors, a mitigation that will preserve a fraction of the positions at best.
One Stelco employee, speaking to reporters on October 9, articulated the puzzle that has dominated discussion on the shop floor: the layoffs are attributed to tariffs, yet the affected work is largely for Canadian orders. The observation is not naive. It goes to the heart of the dispute. If the idled lines were serving domestic customers, the causal chain from an American tariff to a Hamilton layoff runs through the company’s integrated North American allocation decisions rather than through a border tax on the specific product being made.
Ottawa’s options, and their costs
Prime Minister Mark Carney called the layoffs a betrayal when they were first announced on September 29 and committed to pursuing the matter to the fullest extent of the law. What that means in practice is now the operative question, and the available answers are all uncomfortable.
Enforcement under the Investment Canada Act is possible but historically rare. The statute allows the Minister to seek a court order requiring compliance with undertakings, and in extreme cases to seek divestiture. Canada has pursued undertaking enforcement in court only once before, and the precedent is not encouraging: the proceeding was lengthy, and it ended in a settlement rather than a judicial vindication of the undertakings.
A second difficulty is remedial. A court order requiring Cleveland-Cliffs to employ a specified number of workers does not require it to give them anything to do, nor does it create orders for galvanised steel that the company says do not exist at viable prices. Specific performance of an employment undertaking against an unwilling foreign owner is a blunt instrument.
Nicolas Lamp, an associate professor at Queen’s University’s Faculty of Law who has followed the file, appeared on Global News on October 11 to discuss what happens next, and the question he was asked is the one Ottawa is now facing internally: having threatened legal action and been ignored, what does the government actually do?
A third option has entered the conversation. A legal expert told CBC on October 10 that Ottawa should consider nationalising Stelco. The suggestion would have been fringe a year ago. It is being discussed now because the alternative scenarios all involve a Canadian steel asset being run down by an owner whose commercial interest increasingly lies on the American side of the border, while the enforcement tools available to Ottawa operate too slowly to preserve the workforce in the meantime.
The tariff architecture behind the decision
The policy backdrop matters, because the Stelco dispute is not a standalone commercial disagreement.
Canadian steel and aluminium entering the United States face Section 232 tariffs at fifty per cent. Those duties rest on national security authority and were not disturbed by the United States Supreme Court’s decision earlier this year striking down tariffs imposed under the International Emergency Economic Powers Act in Learning Resources, Inc. v. Trump. Canadian trade counsel who reviewed that ruling concluded that the practical impact on Canadian exporters was limited precisely because the measures that bind hardest sit on separate statutory footings.
Layered on top is the Section 338 regime. Proclamations signed on July 20 imposed an additional fifty per cent duty on certain Canadian dairy, alcoholic beverage and motor vehicle goods, effective August 22. Further proclamations on September 8 both expanded the scope of those duties, adding one hundred and twenty two tariff classifications effective September 15, and introduced outright import prohibitions on certain Canadian motorcycles, dairy products and alcoholic beverages, effective at 12:01 a.m. Eastern on September 29. Section 338 duties apply regardless of CUSMA origin and stack with Section 232. Certain steel, aluminium and copper derivative categories sit in zero per cent carve-outs under heading 9903.03.15, but the carve-out structure has itself been narrowed since September 15.
Canada’s countermeasures, effective September 8, apply rates between fifteen and fifty per cent to more than six hundred American product lines. On the same day, Washington barred Canadian goods from United States federal procurement.
The result is an environment in which an integrated North American steel producer faces a different cost structure for the same product depending on which side of the border it is rolled, coated and sold. Cleveland-Cliffs owns capacity on both sides. The allocation incentive is not subtle.
What the numbers say
The macroeconomic context cuts both ways. Canada’s merchandise trade surplus widened to 4.2 billion dollars in August, a more than four-year high, according to data released October 6, with exports to the United States rising 8.1 per cent and the bilateral surplus reaching 11.2 billion dollars. That strength was substantially front-loading ahead of the August 22 effective date, combined with strong refined petroleum exports. It is not evidence that the tariffs are being absorbed.
The labour data told a bleaker story three days later. Statistics Canada reported on October 9 that employment fell by roughly sixty eight thousand in September and the unemployment rate climbed to 6.5 per cent. Analysts noted at the time that the trade war is only partially responsible for the losses, a caveat worth keeping in view when individual plant closures are attributed wholly to tariffs.
Hamilton’s steel sector is not alone. Earlier Stelco cuts in late September affected around three hundred and fifty workers, and the broader pattern of American-owned Canadian steel capacity reducing output has drawn comparisons across the industry. In Windsor, Stellantis has scheduled production suspensions for the weeks of October 19, October 26 and November 2, citing demand and tariffs.
Implications for Canadian businesses
For companies on either side of a cross-border ownership relationship, the Stelco dispute carries several practical lessons.
For Canadian suppliers into integrated North American manufacturers, customer concentration risk now includes a jurisdictional dimension. A customer whose parent can shift production to a lower-tariff jurisdiction represents a different kind of exposure than one who simply might reduce orders. Suppliers to Hamilton Works and Lake Erie Works should be stress-testing receivables and order books against an extended idling scenario rather than the temporary one the company describes.
For foreign acquirers of Canadian assets, the enforcement question is now live in a way it has not been for years. Whatever the outcome in Hamilton, net benefit undertakings are receiving a level of ministerial attention that acquirers should assume will persist. Commitments given to secure approval should be drafted and internally tracked on the assumption that a minister may demand a compliance plan on five business days’ notice.
For steel buyers, domestic galvanised supply is tightening. With Stelco’s galvanised and cold-rolled lines idled, Canadian purchasers face a narrower domestic field and must weigh imports that carry their own anti-dumping exposure. The Canadian International Trade Tribunal continued its anti-dumping order on oil country tubular goods from seven jurisdictions on October 7 while rescinding it for Ukraine, a reminder that Canada’s own trade remedy architecture remains active and that import substitution is not a tariff-free path.
For exporters generally, the Section 338 scope and prohibition annexes should be reviewed against current product lines. Scope has already changed once by proclamation, on September 15, and the prohibitions carry operational consequences beyond cost: covered goods cannot be admitted to a foreign trade zone, entered into a bonded warehouse, moved in bond, or entered for consumption, although goods already in the United States before the effective time may still be entered at the fifty per cent rate, and drawback remains available on the additional duties.
The economics of an idled coating line
The commercial logic Goncalves describes is worth examining on its own terms, because it explains why a trade deal rather than a court order is the lever he says matters.
Galvanised steel is a coated product. Hot-rolled coil is the upstream input; cold-rolling and galvanising are finishing steps that add value and, critically, add tariff classification complexity. Under the American Section 232 regime, finished coated product and its upstream input are not treated identically, and the fifty per cent metals rate has reshaped where in the chain it makes sense to perform each step. Goncalves’s complaint that the tariffs supported hot-rolled while leaving galvanised producers exposed is a complaint about relative protection at different points in the value chain rather than about protection in general.
That distinction also explains his Fortress North America proposal. What he is asking for is a continental perimeter: common external protection against offshore coated product, combined with free internal movement so that Canadian galvanised steel can reach American customers without the fifty per cent charge. From a Cleveland-Cliffs perspective, that arrangement would make the Hamilton lines viable overnight. From an Ottawa perspective, it would require Canada to adopt American-style import restrictions against third countries, which carries its own consequences for Canadian steel buyers and for Canada’s obligations at the World Trade Organization.
Running a coating line at half capacity is genuinely expensive. Coating lines have high fixed costs, substantial energy draw and quality tolerances that degrade at low throughput. The company’s claim that half-rate operation is inefficient is not a pretext. The contested question is whether inefficiency amounts to the kind of commercial impossibility that would excuse a legally binding employment undertaking, and whether a company that lobbied for the tariffs creating the inefficiency can invoke it.
A city that has done this before
Hamilton has absorbed steel contractions before, and the municipal economics are well understood locally. Steelmaking employment in the city has declined over four decades from a peak measured in the tens of thousands, and each contraction has been followed by partial diversification into health care, education and logistics. What distinguishes the current episode is its cause. Previous rounds followed technological change, global overcapacity or corporate insolvency. This one follows a policy decision taken in another country, and it is therefore reversible in principle by a different policy decision.
That is the source of the particular frustration in USW Local 1005’s language. A plant closed by obsolescence is a loss to be absorbed. A plant idled pending a negotiation is a bargaining chip, and the workers understand themselves to have been designated as such.
The regional supply chain effects extend well beyond the two plants. Industry analysts noted after the earlier September round of Stelco cuts that steel layoffs carry a domino effect through trucking, industrial services, maintenance contractors and the local consumer economy, with multiplier estimates commonly placed at two to three indirect positions for each direct manufacturing job in an integrated steel operation. On that arithmetic, five hundred direct positions implies a regional exposure of well over a thousand.
The wider provincial response
Provincial governments have responded to the tariff round with the tools available to them, which are principally procurement and liquor retailing rather than trade law.
Ontario has maintained the removal of American alcohol from Liquor Control Board of Ontario shelves, with Premier Doug Ford stating that the measure stays in place until tariffs are removed or a new trade deal is reached. New Brunswick moved in September to bar United States goods from major provincial contracts. Several provinces have pursued buy-local campaigns, though retailers have reported difficulty keeping pace with the resulting demand shift.
These measures matter commercially more than their symbolic framing suggests. Subnational procurement is a large share of total Canadian public purchasing and, unlike federal tariff policy, it can be adjusted without legislation and without reference to the dispute settlement provisions of any trade agreement. For Canadian manufacturers, that creates a genuine if partial domestic demand offset, and firms that have not registered on provincial vendor rosters are leaving an available channel unused.
What happens next
Cleveland-Cliffs was due to file its response to Joly’s demand by Tuesday, October 13. The public-facing portion of that filing will be the first indication of whether the company intends to offer Ottawa a path short of litigation, and the government’s reaction will indicate whether the fullest extent of the law was a commitment or a negotiating posture.
Lake Erie Works layoffs could begin as early as October 24, which gives both sides roughly a fortnight before the dispute widens to a second community. Beyond that sits the CUSMA review process, with consultations opened on October 2 and submissions due January 12, and a United States Trade Representative who said on October 8 that Washington is holding fast.
Goncalves says the recall depends on a steel trade deal. On present evidence, there is no deal in prospect before the new year. Hamilton’s steelworkers are being asked to wait on a negotiation that has not yet reconvened.