Canada is on edge, but the mining industry appears quietly confident it will emerge largely unscathed from US President Donald Trump’s threat to put 25% tariffs on all goods from its northern neighbour.

More than half of Canada’s mineral exports —valued at more than C$80 billion— went to the US in 2022. And just two years earlier Trump in his first term set up the Joint Action Plan on Critical Minerals Collaboration.

But Trump seemed ready to tear everything up with comments this week:

“We have a tremendous [trade] deficit with Canada,” the president said. “We don’t need them to make our cars, and they make a lot of them. We don’t need their lumber, because we have our own forests, etc, etc. We don’t need their oil and gas. We have more than anybody.”

As most Canadian industry leaders have pointed out, the US depends on Canada for a host of minerals and supplies. It gets germanium, aluminum and nickel far easier than from China, whose stranglehold on critical minerals Washington is trying to loosen.

“We produce a certain refined product of nickel that is suited for the US industries,” Pierre Gratton, president and CEO of the Mining Association of Canada, said in a phone interview. “When China imposed a ban on the export of germanium to the United States, we could supply them with germanium, and this underpinned how important our trade relationship is to one another.”

Decision

Gratton said it’s difficult to believe that Trump will actually follow through on the tariff threat against a major supplier to the American economy, but equally as difficult to determine Trump’s final decision.

“It sure sounds like that’s what he wants to do, just put a shock to the system and make Canada buckle, and that’s very scary, scary for all of North America,” Gratton said. “But will he in the end get advice that cautions him against that kind of an approach, and will Canada be able to negotiate its way out of this? I don’t know. I don’t know because the story changes daily.”

Pierre Lassonde, a founder of Franco-Nevada (TSX: FNV; NYSE: FNV) and a former president of Newmont (NYSE: NEM, TSX: NGT), said Trump is unlikely to impose tariffs.

“All mine output is raw material for the US industrial complex,” Lassonde told The Northern Miner by email. “[The higher costs associated with] any tariffs automatically go to the consumers as all commodities are traded worldwide for the same price.

“As well, if the USA wants our critical metals, why would they put a tariff to get them? My sense is that Trump will mostly refrain from tariffs on all raw materials including carbon products, i.e. oil and gas.”

Early days

Stephen Roman, the founder and co-chairman of Gold Eagle Mines, which was acquired by Goldcorp for $1.5 billion in 2008, said it was early to determine the final outcome but suggested Trump is unlikely to levy tariffs on Canada.

“He had to come out with some fairly strong statements to wake up Canadians that were under a Trudeau government that’s very lackadaisical on many issues and it seems to have had the right effect,” Roman, who now heads Global Atomic (TSX: GLO; US-OTC: GLATF) and its uranium project in Niger, said by phone.

“At the end of the day, it wouldn’t be good for the United States or Canada to start raising costs for mineral products, whether they be oil and gas or metals. We just have to assess it when the final [tariff] determination is made.”

Originally, Trump declared the tariffs would be slapped on Canada and Mexico (and 10% on China) within hours of his inauguration. Then there was talk of studying the process and some pundits said Trump would have to assemble a trade negotiation team. Trump changed his levy date to Feb. 1, then floated it could be April 1. It was widely reported that no American officials had in fact informed their Canadian counterparts to expect tariffs.

Experts suggested this was a way to keep Canada and Mexico off balance, a negotiating tactic to reopen the North American free trade agreement within months, a year earlier than the deal allows.

“Part of the strategy for him is to create uncertainty in the hopes of creating a better transactional bargain,” Clifford Sosnow, head of law firm Fasken’s international trade and investment group, said by phone. “Maybe he wants to use tariffs to get an energy new deal. It’s really not clear at this stage of the game.”

Orders

One of the scores of executive orders that Trump signed within hours of occupying the Oval Office was a declaration of emergency regarding energy and critical minerals to thwart China’s control over the industry in the name of national security.

The American departments of energy and defence are already sending tens of millions of dollars to critical mineral projects in Canada. Trump wants to make the US the dominant producer and processor of minerals, including critical minerals, but that doesn’t mean funding only US mining projects, the trade lawyer said.

“He’s clearly trying to say, ‘it’s time we look to other sources of supply’ and so there’s openings there for Canada,” Sosnow said. “What does that mean in terms of increased investment in the Canadian mining space? That’s where negotiations come in.”

However, getting a common stance on those negotiations and how to respond to the tariffs threat is creating political in-fighting on both sides of the border. Republicans may not be aware of how tariffs would harm Midwest state economies, especially in the automotive industry.

In Canada, Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe expressed concern retaliatory tariffs or export bans could slash their billions in revenue from of oil and gas, and uranium and potash, respectively. Meantime, Ontario’s Doug Ford has called for strong retaliation.

Gun fight

“You can’t bring a knife to a gun fight,” Ford told reporters Jan. 22. “We have to make sure we match these tariffs dollar for dollar. We’re need to target where it’s going to impact Americans the most.”

Canada’s stance is further complicated. Ford has emerged as captain of Team Canada after Justin Trudeau said he intends to resign as prime minister. But the Ontario premier may be distracted by holding an early election this month. Even so, the Conservative Party’s Ford and the Liberal Party’s Trudeau agree on the country’s response if Trump carries through on his threat.

“Canada will have a strong, robust response, because we don’t want this, but we will respond if necessary,” Trudeau told reporters within hours of Ford’s gun quip. “Prices for American consumers on just about everything will go up, and we don’t think he wants that.”

Federal opposition leader Pierre Poilievre said he would “fight fire with fire,” but he has dodged questions in news conferences on whether he’s actually more aligned with Smith in Alberta – a core constituency of his – to avoid a strong response to Trump.

Sosnow, the partner at Fasken, questioned the rationale of export bans and strong retaliatory tariffs. Would Ford shut the auto sector or cross-border electricity deals that would ditch billions in revenue? 

“It’s a bit like radiation treatments,” he said. “You want to kill the tumor without killing the patient, right? And some of these retaliations could have devastating impacts on the economy.”

Source: MINING.COM – Read More