I see in the paper this morning that the Canadians sent $7 billion worth of steel here last year while we sold a similar amount to them. So - why don’t both countries just keep their own steel? This is perplexing to someone who understands absolutely nothing about international trade. Dopers?
Different types, different specs. Each country has a comparative advantage in the type they produce, so it makes economic sense for both to specialize and trade rather than try to do it all themselves. This is a basic economic truth that some people never bothered to learn, and it applies to just about every good/service on the planet.
Also Canada and the US are both very big, which affects how efficient it is to transport resources. If you live in Seattle and what you want is made in both British Columbia and Maine, it is far easier to transport it from BC than Maine, even if there is a border crossing. Conversely consumers in Halifax would probably prefer sourcing from Maine than BC. It would take very large tariffs to overcome that efficiency.
On re-reading, I should clarify that this isn’t a slam on the OP, who asked an intelligent question. It’s a slam on those voters and policy-makers who let ideology over-ride common sense and economic efficiency.
“Steel” is a catch-all name for iron mixed with carbon. The percentage of carbon and the type and percentage of other metals have a gigantic range, with each making a different form of steel, good for different uses, made in different ways in different factories, and costing different amounts.
Using “steel” in a newspaper article is pretty lazy. An analogy would be talking about “vehicles.” That could include sedans, SUVs, pickup trucks, buses, semis, earth movers, and golf carts. Those are mostly totally not interchangeable. “Steel” is a bunch of non-interchangeable stuff in the same way “vehicles” is.
Like Exapno said: There are a lot of grades of steel, plus transportation costs. No single company or region will supply them all.
This occurs in almsot every industry. Even nations that produce huge amounts of some product will often end up importing some, or even a large amount, if it’s more convenient. The United States imports around 10% of its total oil supply - but we export 6%-7% in return. Some of that is because different groups or industries need different kinds of oil products, but some is simply price equalization around the world.
See, this is where I have to get off the boat. Different types of steel, sure, ease of transportation and procurement, fine, but “SIMPLY price equalization around the world” leaves me lost again. I think I have enough of an answer already. Please don’t explain.
For a weird example, there are two Guinness breweries in North America: One in Canada to serve the US market, and one in the US to serve the Canadian market. That way, both can label the beer as “imported”.
It’s similar to how we export a lot of oil while also importing a lot. The shale boom has increased light oil production but we have a lot of infrastructure for processing heavy oil, so we export light and import heavy.
I cannot find the article but there was an article shortly after the tariff tiff started, I think in the Washington Post, where they interviewed a U.S. manufacturer of finished goods. The kind of steel they use is not made in the U.S. at all, and in fact is available from only three suppliers. The tariff on imports would be very harmful to his business.
It’s not that complicated, and has been mentioned above. Everybody purchases whatever goods cheapest or easiest for them to receive. Sometimes, it means that the USA sells oil or steel to somebody but needs to buy from elsewhere to meet their own needs. Happens every day - literally.
Also remember that sales of commodities are not centrally managed by government. Every consumer of steel buys steel from wherever it makes sense for that consumer, which might be a U.S. provider or a foreign provider. The reasons why have already been described. So some domestic buyers are buying foreign, and some foreign buyers are buying U.S.
Not sure. But I think there is also a lot of steel product that is imported into both countries from overseas ( literally ) That then gets imported/exported between the US and Canada. Further muddying the concept.
China is supposedly dumping steel product all over the place. Multinationals move this around all over the place. In the end it can be difficult to say what is Canadian or US steel. This is the case with many things. When your politician spouts off about protecting domestic jobs for product X. The result may only be protecting gigantic multinational corporation X. Made in country X is often a pseudo fact created just by applying the sticker. Which may have also been made somewhere else.
But actually most of the reason in case of US-Canada steel trade is something like ‘price equalization’. Not like that’s a standard term everyone should know (AFAIK anyway) but just meaning that it’s reasonably competitive, and up to now low/no tariff market in relatively undifferentiated products*. So the big ‘US’ and ‘Canadian’** mills in the Great Lakes region naturally offer similar products at a similar price. Like gas stations in a neighborhood generally do. So one consumer stops by this station and another that station, or one sometimes stops at one but other times at the other.
Across all of the steel market there are some specialized products made by only a few companies none of which are in the US (or none in Canada). But that’s not generally the case of US-Canada steel trade which is by and large similar steel products sent in both directions. And across all of US-Canada trade some cases are driven by north-south transport to/from the US/Canada being cheaper than east-west transport across the US or Canada, but again that’s not typically the case with steel were a lot of the import/export is from mills in the Great Lakes region of both countries.
*there’s no single product ‘steel’ that specific customers are ordering but by and large it’s products of a standard specification across makers (pipe of X diameter and wall thickness made according to ASTM standard no. X, etc).
**one of the biggest US ones and the two biggest Canadian ones are owned by Luxembourg-domiciled ArcelorMittal.
There’s also the matter of futures and long-term contracts. Like, maybe, at one moment, Canadian oil is cheaper than American oil. The company producing it in Canada thinks it’ll stay that way for a while, but the American refinery that’s buying it isn’t so sure. So the refinery signs a contract with the Canadian extraction company that they’ll continue selling them X barrels a year at that price for the next five years. Meanwhile, four years later, it turns out that the price of American oil has dropped and Canadian oil has risen. That American refinery is still importing Canadian oil at the contracted price, but some other refinery in Canada might also be importing the now-cheaper American oil.
In fact, the companies making it in China are often multinationals. For example, the aforementioned ArcelorMittal. Their factories in China, like the factories in China of Novartis, IKEA or Zara to mention three other sectors, aren’t branches of the Chinese government.
Good example. The US has a lot of refining capacity for heavy oil.
We think of oil as fungible, and it is to a large extent, but sociopolitical reality can break that assumption down at times.
And steel is somewhat less fungible than oil. Free trade policies generally increase the fungibility of goods, usually to the benefit of all involved.
To elaborate - “steel” is a generic term, and to certain extent it is a commodity. But there are different products - pipes, thin sheet (you see transported in big rolls) and of course, each of these products depending on intended use may have different formulations… Thick sheet for things like ships or containers, structural I-beams etc. Different producers will specialize in different products. A factory for making I-Beams may not be good at making stainless steel for appliances like refrigerators. Another consideration is that major shape changes of steel typically happen at high temperatures; so it is often more economical to form a final product while the steel is hot, rather than refining steel to ship in bricks to spend more energy to re-heated and re-form it elsewhere.
I even remember a story about an American steel mill that was forced by the tariff to close one of their plants. Apparently their raw material was itself steel, that they imported from Russia, and then milled into a different shape.