First of up to 500 layoffs land at Hamilton Works as Ottawa’s compliance deadline for Cleveland-Cliffs expires Tuesday, turning a single steel mill into the test case for whether Canada can enforce foreign investment promises in the middle of a tariff war
HAMILTON, Ont., October 11, 2026
The first wave of layoffs at Stelco’s Hamilton Works took effect this weekend, converting months of tariff-driven uncertainty in Canada’s steel sector into hard job losses and setting up a confrontation between Ottawa and the mill’s American owner that will come to a head within 48 hours.
Cleveland-Cliffs Inc., the Ohio-based steelmaker that acquired Stelco in 2024, began issuing layoff notices in Hamilton on October 7. Roughly 90 notices were delivered in the first week, with about 330 Hamilton workers expected to be affected over a three-week period, according to reporting by BNN Bloomberg. At Stelco’s Lake Erie Works in Nanticoke, Ont., a further 40 to 50 workers could be laid off as early as October 24. Taken together, the company has said the reductions could reach 500 positions.
Industry Minister Mélanie Joly has given Cleveland-Cliffs until the evening of October 13 to produce a plan showing how it intends to honour the employment commitments it made to the federal government when it bought Stelco two years ago. Those undertakings, made under the Investment Canada Act, included maintaining at least the same number of unionized employees and the bulk of non-unionized positions for a five-year period. Joly wrote to Stelco president Paul Simon on October 5 setting a five-business-day clock. Her message, as she put it publicly, was blunt: “They need to comply.” If the company does not, she said, “we will use the full force of the law.”
Cleveland-Cliffs has signalled it will respond within the deadline. What that response contains, and whether Ottawa judges it adequate, will determine whether Canada’s principal tool for policing foreign takeovers has teeth when the acquiring company is operating under 50 per cent American tariffs and a trade relationship that has effectively broken down.
The company’s case
Cleveland-Cliffs chief executive Lourenco Goncalves has framed the reductions as temporary and commercially unavoidable. Speaking on October 8, Goncalves put the figure at 350 workers rather than 500 and characterized the action as “a temporary layoff.” He attributed the decision to weak demand for galvanized steel, to a Canadian market he described as too small to sustain both Stelco and rival ArcelorMittal Dofasco, and to import pressure. The Hamilton facility, he said, has been running at roughly 50 to 55 per cent of capacity.
Goncalves also tied the workers’ return directly to the state of Canada-United States trade relations. Laid-off employees would be recalled, he said, once a steel trade arrangement between the two countries permits galvanized production and sales to resume at normal volumes. He said he did not know when such a deal might come.
That linkage is the crux of the dispute. Joly has rejected the argument that tariffs and adverse market conditions release Cleveland-Cliffs from undertakings it signed in 2024, when the Section 232 steel tariff environment was already a known commercial risk. Goncalves called the minister’s comments “totally unfair.”
For the workers on the receiving end, the recall promise reads less like reassurance than leverage. Mike Watts, whose last day at the Hamilton plant was Friday, October 9, described receiving his notice from supervisors who handed him an envelope and wished him luck. “What’s my future? That’s all I’m thinking about. What will I do next?” he told CP24. Of the company’s position that a trade deal would bring the jobs back, Watts was direct: “I take it as Cleveland-Cliffs is using this as blackmail.”
Union response
United Steelworkers Local 1005, which represents the Hamilton workforce, has said members feel betrayed and are being used as bargaining chips in a dispute between two national governments. Local president Ron Wells has characterized the situation in those terms publicly. At Lake Erie Works, USW Local 8782 president John McElroy has said the local is working with plant management to redeploy affected members into work currently performed by outside contractors, an approach that could blunt some of the Nanticoke reductions without changing the headline number.
The union had earlier called the company’s stated rationale for the cuts “disingenuous and contradictory,” pointing to the gap between Cleveland-Cliffs’ public statements about Canadian market conditions and the commitments it gave Ottawa to secure approval of the acquisition.
What the Investment Canada Act actually requires
The Stelco file is a live test of a mechanism that is invoked often in political rhetoric and rarely in court. Under the Investment Canada Act, a foreign acquisition above the review threshold must be found likely to be of net benefit to Canada. In practice, that finding is secured through a set of written undertakings: employment floors, capital expenditure commitments, head office location, procurement from Canadian suppliers, and similar obligations, typically running three to five years.
Enforcement is available. The responsible minister can demand compliance, negotiate remedial undertakings, and ultimately seek a court order. Section 40 of the Act allows the minister to apply to a superior court for an order directing compliance, imposing a penalty of up to $10,000 per day of contravention, or, in the most severe cases, directing divestiture of the Canadian business. That last remedy has effectively never been used against a major acquirer.
The practical difficulties are considerable. Undertakings are negotiated confidentially and their precise wording is not public, so outside observers cannot assess whether a given employment number triggers a breach. Most undertakings contain force majeure or material adverse change language that allows the investor to argue that circumstances beyond its control excuse performance. A 50 per cent American tariff wall, imposed after the transaction closed, is exactly the sort of event such language contemplates. Ottawa’s counter-argument, which Joly has advanced, is that Section 232 steel tariffs were in place in various forms well before 2024 and that a sophisticated steelmaker cannot claim surprise.
There is also a timing problem. Litigation under the Act moves in months and years. Layoff notices move in days. By the time a court ruled, the Hamilton workforce would have dispersed.
That gap is why the conversation has started to move toward more aggressive options. In a story published October 9, CBC News reported that at least one legal expert has argued Ottawa should consider nationalizing Stelco outright rather than pursuing a remedy that cannot arrive in time to matter. Nationalization carries its own problems, including compensation obligations, the risk of investor-state claims, and the signal it would send to foreign investors already reconsidering Canadian exposure. But the fact that it is being discussed at all indicates how far the policy conversation has shifted since the summer.
The political fight
Conservative Leader Pierre Poilievre used the Stelco layoffs to launch a five-point steel platform on October 9 in Burlington, Ont. The central plank is a call for Ottawa to sue Cleveland-Cliffs, which Poilievre suggested could happen as soon as the following Monday. The objective, as he framed it, would be either the reinstatement of laid-off workers and a restart of production, or a forced sale of Stelco to a Canadian owner prepared to run it.
The remaining four points are broader industrial policy: eliminating the industrial carbon price, tightening enforcement against Chinese steel imports, accelerating approvals for liquefied natural gas projects, and negotiating a tariff-free trade agreement with the United States.
“The only thing that we would accept is these workers getting their paycheques,” Poilievre said. Addressing Prime Minister Mark Carney directly, he added: “Get back to the negotiating table to get the deal you promised.” To the workers themselves, he said: “These workers did everything right, and my message to them is to keep the hope and keep the faith.”
Poilievre also accused the prime minister of being “out of touch,” citing Carney’s statement in the House of Commons on October 7 that “jobs are up, the economy is up, we’re moving forward.”
That remark has aged poorly. Two days later, Statistics Canada reported that the economy shed 68,300 jobs in September against a consensus forecast of a 9,200 gain. August had already seen a decline of 41,700. Year to date, Canada has now lost a net 41,200 jobs, against a gain of 211,300 over the same stretch of 2025. The unemployment rate rose to 6.5 per cent from 6.4 per cent. Manufacturing, the sector most directly exposed to American tariffs, lost 12,700 positions. The labour force participation rate fell two tenths of a point to 64.8 per cent, its weakest reading in 29 years outside the pandemic period.
Sal Guatieri of BMO called the September numbers “quite disappointing” and noted that job losses across August and September totalled roughly 110,000.
The tariff backdrop
Stelco’s position cannot be separated from the structure of tariffs now governing North American steel.
The United States maintains Section 232 national security tariffs of 50 per cent on imported steel and aluminum, with no exemption for Canada. Those duties have been layered on top of a separate and more aggressive American action taken this year. On July 20, 2026, President Donald Trump announced 50 per cent tariffs on a range of Canadian goods under Section 338 of the Tariff Act of 1930, a statute no president had previously invoked to impose duties. According to a Congressional Research Service analysis published September 14, the Section 338 proclamations target alleged Canadian discrimination against American commerce in alcoholic beverages, dairy, and motor vehicles. Section 338 caps the offsetting duty at 50 per cent and, if the discrimination is found to persist, authorizes the president to exclude the offending country’s products from the American market entirely.
The Section 338 tariffs took effect August 22 after negotiations collapsed. They carry no CUSMA exemption. Goods already subject to Section 232 duties were initially carved out, but a revised product list effective September 15 pulled some of them back in, and the White House has said Section 232 duties stack on top, producing combined rates of up to 100 per cent on certain items. On September 29, outright import exclusions took effect on close to US$967 million worth of Canadian goods, including certain alcoholic beverages, dairy products, molasses, and motorcycles. That figure represents roughly 0.3 per cent of American imports from Canada in 2025.
Canada’s response came into force on September 8: counter-tariffs on C$27.6 billion of American imports spanning more than 700 tariff classifications. The rate schedule runs at 50 per cent on steel and aluminum products, dairy, pulp and paper, plywood and laminated wood, electronics, clothing, plastics and rubber articles, cosmetics, and sports equipment; 25 per cent on fish and seafood, wood and lumber, household steel and aluminum articles, major appliance parts, carpets, cutlery, and cheeses; and 15 per cent on forklifts and industrial handling equipment, agricultural machinery parts, air conditioners, and industrial moulds. Pre-existing counter-tariffs on American steel and aluminum rose from 25 per cent to 50 per cent to match the American rate. CBSA Customs Notice 26-23 governs how the surtax is applied, calculated, and collected. Finance Canada has indicated the new measures are not intended to stack on existing counter-tariffs.
Alongside the counter-tariffs, Ottawa announced a C$7.5 billion support package for affected workers and businesses.
The domestic steel protection architecture matters as much to Stelco as the American measures do. Canada has tightened tariff rate quotas on steel imports, capping non-FTA countries at 20 per cent of 2024 volumes and FTA partners other than the United States and Mexico at 75 per cent, with a 50 per cent over-quota tariff. A 25 per cent duty applies to steel melted and poured in China, and a further 25 per cent tariff covers targeted derivative products such as wind towers, prefabricated buildings, fasteners, and wire. Federal support includes a C$5 billion Strategic Response Fund, C$150 million earmarked for steel producers under the Regional Tariff Response Initiative, a Buy Canadian procurement rule requiring contracts above C$25 million to prioritize Canadian materials, and an agreement with the railways to halve interprovincial freight rates for steel and lumber beginning in spring 2026.
Government analysis has projected Canadian steel exports falling by more than one million tonnes across the first two quarters of the tariff period.
Reading the galvanized argument
Goncalves’ specific claim deserves scrutiny because it determines whether this is a tariff story or a market story, and therefore whether Ottawa’s undertaking argument holds.
Galvanized flat-rolled steel is heavily used in automotive body panels, appliances, and construction products. Stelco’s galvanizing lines were built around volumes that assumed access to the American market. When a 50 per cent duty makes those shipments uneconomic, the output has to find a Canadian home. The Canadian market for galvanized sheet is not large enough to absorb both Stelco’s and ArcelorMittal Dofasco’s capacity, which is the substance of Goncalves’ point about the market being too small for both producers.
Where the argument becomes contestable is in the conclusion. Cleveland-Cliffs owns capacity on both sides of the border. A rational owner facing a tariff wall concentrates production where the tariff does not apply, which in this configuration means the United States. Critics of the company, including the union, argue that what is being presented as a market-driven curtailment is in substance a reallocation of volume to American mills owned by the same parent. That characterization, if Ottawa adopts it, converts a force majeure defence into a deliberate breach.
Cleveland-Cliffs has not conceded the point, and the distinction may ultimately be unprovable without access to internal production planning documents. It is, however, the question Joly’s letter is designed to force the company to answer in writing.
Economic impact
Hamilton has absorbed steel contractions before, and the arithmetic is well understood locally. Direct employment is the visible number. The larger exposure sits in the supply chain: scrap dealers, industrial gas suppliers, refractory specialists, trucking firms, maintenance contractors, and the tooling shops that serve the mill. Industry estimates commonly place indirect employment at two to three jobs for every direct steel job, which would put the full exposure of a 500-position reduction somewhere between 1,500 and 2,000 positions across southern Ontario.
Wage levels compound the effect. Unionized primary steel work pays well above the regional manufacturing average, and the local consumption those wages support is not readily replaced by employment in lower-paid sectors. Nanticoke, where Lake Erie Works is among the largest employers in Haldimand County, has fewer alternatives still.
The national picture into which these losses fall is mixed rather than uniformly bleak. Statistics Canada reported on October 6 that the merchandise trade surplus widened to C$4.2 billion in August, well above the C$1.55 billion consensus and the strongest reading in more than four years. Exports rose 2.5 per cent to C$77.91 billion. Exports to the United States jumped 8.1 per cent, lifting the bilateral surplus to C$11.2 billion, a 19-month high, and pushing the American share of Canadian exports back to nearly 70 per cent for the first time since September 2025.
Those numbers describe front-running, not resilience. Exporters accelerated shipments ahead of measures taking effect in late August and September. Exports to countries other than the United States fell 8.5 per cent in the same month, widening the deficit with the rest of the world to C$7.0 billion from C$5.3 billion. Prince Owusu of Export Development Canada noted that strong diesel shipments might offset some of the September tariff impact, but economists broadly expect September and October data to show the fuller effect of the American tariffs, the Canadian counter-tariffs, and the import bans together.
Markets have adjusted accordingly. Following the September labour force release, the Canadian dollar fell 0.44 per cent to 69.99 US cents, two-year government bond yields dropped 9.5 basis points to 2.410 per cent, and money market pricing for a Bank of Canada rate increase in October was withdrawn. Royce Mendes of Desjardins said the weakness in the labour market makes a hold the likely outcome at the October decision, while cautioning that higher energy prices could feed into other inflation categories through the autumn.
Implications for importers and exporters
For Canadian steel buyers, the Stelco curtailment tightens an already constrained domestic supply picture for galvanized product. With tariff rate quotas limiting offshore alternatives and a 50 per cent over-quota duty applying beyond the caps, buyers who have been sourcing galvanized sheet from Stelco should be modelling substitution well in advance of contract renewal. The practical options are ArcelorMittal Dofasco, quota-limited imports from FTA partners, and American product carrying Canadian counter-tariffs at 50 per cent. None of those is cheap, and all of them involve lead times longer than the layoff schedule.
Fabricators and manufacturers who incorporate galvanized steel into finished goods should be reviewing whether their own products remain CUSMA-originating if input sourcing changes. A shift from Canadian to offshore steel can affect regional value content calculations and, for goods destined to the United States, the preferential treatment that still applies to products outside the Section 338 and Section 232 lists.
Exporters of steel and steel derivatives to the United States should assume no near-term relief. The Section 338 regime has no CUSMA carve-out, the exclusion lists have been expanded rather than narrowed, and the United States Trade Representative has publicly described the American position as unchanged. Pricing and contract terms should be built on the assumption that the current rate structure persists through at least the first quarter of 2027.
Importers bringing American steel, aluminum, or derivative products into Canada should confirm their classification against the counter-tariff schedule and review whether any applicable remission framework covers their goods. Remission processes established for earlier rounds of counter-tariffs continue to apply, and the C$7.5 billion support package includes components accessible to firms facing input cost increases they cannot pass through.
Any business that was party to, or is contemplating, a foreign acquisition with Investment Canada Act undertakings should watch the October 13 outcome closely. If Ottawa accepts a plan that preserves the company’s flexibility, the practical value of employment undertakings will have been meaningfully reduced. If it litigates, the sector will have its first contemporary read on how a Canadian court treats a tariff-based defence to an undertaking breach.
What happens Tuesday
Three outcomes are plausible. Cleveland-Cliffs may submit a plan that satisfies Joly, likely involving a defined recall timeline, a cap on permanent separations, or capital commitments at Hamilton. It may submit a plan Ottawa rejects, which would move the file toward a Section 40 application and, in parallel, intensify pressure for the more interventionist options now being discussed publicly. Or it may submit something ambiguous enough to keep negotiations alive without resolving anything, which, given the pace at which the layoffs are proceeding, would amount in practice to the second outcome arriving more slowly.
What is already settled is that roughly 90 Hamilton workers have received notices, that the first of them are now out of work, and that the recall Goncalves has promised is contingent on a trade agreement neither government has shown any sign of reaching.