(Kitco News) - Despite avoiding an imminent trade war with the U.S. over steel and aluminum tariffs, Canada should not be breathing easier, this according to Shark Tank star Kevin O’Leary.
“I don’t think the long-term outcome of the negotiations is going to be better for Canada,” O’Leary told Kitco News. “For example, on steel, what will probably end up in the NAFTA negotiations is proof of source of all steel,” he said.
Canada and Mexico, members of NAFTA, have been indefinitely exempt from the proposed steel and aluminum tariffs. However, this doesn’t mean that Washington will soften its stance towards competing with Canadian industries, said O’Leary, as U.S. protectionism will rear its head in other forms.
One outcome that O’Leary, the chairman of O’Shares ETFs, predicts is that steel-consuming industries will see profits shrink as outsourcing metals becomes more difficult.
“If you’re a Canadian automotive manufacturing facility that’s using Chinese steel to reduce your costs, you’re not going to be able to do that anymore, so your margins are going to get compressed,” O’Leary said.
While Canada doesn’t have to deal with a trade war, the same can’t be said for the rest of the world as China, in particular, is in Trump’s crosshairs.
Thursday, the Trump administration outlined a sweeping plan to impose 25% tariffs on $60 billion worth of Chinese imports, with a focus on IT, aerospace, and machinery. Although some analysts think that the tariffs won’t have a significant impact on the economy, others believe this signals the beginning of a global trade war to come.
The S&P 500 was down over 1% on Thursday’s session over fears of potential Chinese retaliation, which would hit sectors more dependent on exports to China, such as the agriculture industry. Currently, 60% of all U.S. soybean exports go to China.
By David LinFor Kitco News
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