The United States’ recent escalation of tariffs on Canadian aluminium has spotlighted the complex and longstanding trade relationship between the two countries, with significant economic repercussions for both sides. Canadian aluminium, largely powered by abundant hydropower in regions like Saguenay, Quebec, has supplied around 70 percent of U.S. aluminium imports for decades, a legacy dating back to World War II.

During his presidency, Donald Trump initially exempted Canada from a 10 percent aluminium tariff he imposed on other countries. However, upon returning to office, Trump revoked Canada’s exemption and increased the tariff to 50 percent, citing unfair treatment by Canada and asserting that the U.S. did not need Canadian natural resources. The tariffs are part of broader U.S. efforts to boost domestic aluminium production under the rationale of national security.

These duties have contributed to a surge in aluminium prices in the United States, elevating costs for industries from housing to automotive and electronics. The situation has been compounded by global factors such as restrictions on Russian aluminium and disruptions related to conflict in the Persian Gulf, which have tightened international supplies.

Canada, meanwhile, is responding by strengthening trade relationships with Europe. Prime Minister Mark Carney has pursued closer ties with the European Union, with EU officials expressing interest in adding Canada as an associate trade member. The U.S. has threatened further tariffs on Europe amid this shift, with Trump labeling Canada as a poor trade partner.

The aluminium industry’s history is deeply entwined with energy resources. Producing aluminium requires enormous electricity, making access to low-cost power critical. Canada’s hydropower capacity, particularly in the Saguenay region, allows for competitively priced electricity—an advantage Rio Tinto, which now owns the smelters originally built by Alcoa, leverages. Rio Tinto is also advancing low-carbon aluminium technology through a joint venture with Alcoa and the Quebec government, supported by Canadian authorities and companies like Apple.

On the U.S. side, efforts to expand domestic aluminium production face obstacles. A proposed $5.6 billion smelter project in Inola, Oklahoma, backed by Emirates Global Aluminium and Century Aluminium with support from the Biden administration, has encountered local opposition centered on environmental concerns and foreign investment. The project has become a divisive political issue, with opponents criticizing foreign involvement and taxpayer subsidies, while proponents emphasize job creation and strategic benefits.

U.S. Commerce Secretary Howard Slatnick has emphasized the importance of domestic production for national security, noting that some applications require primary aluminium that cannot be substituted by recycled metal. However, domestic smelter capacity has declined significantly over recent decades, challenged by cheaper foreign competitors and the high cost of electricity.

Industry officials argue that Canada’s low-cost hydropower is not an unfair subsidy but a natural advantage, and Canadian producers deny allegations of dumping. Jean Simard, president of the Aluminium Association of Canada, characterized Canada as a reliable and allied partner to the U.S., contrasting this with how some U.S. officials have portrayed Canadian industry.

The evolving trade tensions and shifting global demand are affecting market dynamics. Canadian aluminium exports to Europe have surged, partly driven by the EU’s carbon taxes that favor lower-emission metals. Analysts warn this could further reduce U.S. access to Canadian supplies and exacerbate cost pressures for American manufacturers.

In Saguenay, local leaders underscore the historical and ongoing partnership with U.S. industry. Mayor Luc Boivin highlighted the region’s role in supplying both raw materials and finished products like aluminium-bodied Ford trucks, emphasizing Canada’s position as a dependable supplier with abundant energy resources integral to aluminium production.

As the tariff dispute continues, it remains uncertain how U.S. aluminium users will adjust to higher costs and tightened supply, and whether domestic production can expand sufficiently to replace imports historically sourced from Canada.