Ottawa is preparing to escalate its trade dispute with Washington over the latter’s decision to impose a 35% tariff on Canadian steel imports. Senior government officials confirmed that Canada will formally challenge the measure at the World Trade Organization (WTO), arguing that the tariff violates international trade rules and undermines decades of economic cooperation between the two nations. The move signals a shift toward multilateral pressure after bilateral negotiations failed to yield concessions from the Biden administration.

The dispute stems from President Biden’s executive order last month reinstating steep tariffs on foreign steel, citing national security concerns under Section 232 of the Trade Expansion Act. While the policy primarily targets Chinese overcapacity, it unexpectedly included Canada—a move that blindsided Ottawa given its integrated supply chains with the U.S. and status as a NATO ally. Industry analysts note that Canadian steel accounts for less than 5% of total U.S. imports, raising questions about the tariff’s strategic rationale.

A calculated WTO strategy

Insiders reveal that Global Affairs Canada has spent weeks building a coalition of trading partners affected by similar U.S. tariffs, including the European Union, Japan, and South Korea. Unlike the Trump-era trade wars where Canada acted unilaterally, this approach seeks to isolate Washington through coordinated WTO complaints. "This isn’t just about Canada," said a senior trade official speaking on background. "We’re demonstrating how arbitrary Section 232 actions destabilize the entire rules-based system."

The case will likely hinge on whether the WTO accepts national security as justification for trade restrictions—a contentious issue since the Trump administration’s 2018 tariffs. Though WTO rules permit security exceptions under Article XXI, past panels have been reluctant to adjudicate what constitutes legitimate national security concerns. Legal experts suggest Canada may instead focus on procedural violations, such as the U.S. failure to properly consult trading partners before implementing the measures.

Domestic political fallout

Prime Minister Trudeau faces mounting pressure from steel-producing provinces like Ontario and Alberta, where mills have already begun reducing shifts. The United Steelworkers union, typically aligned with Trudeau’s Liberals, has demanded retaliatory tariffs on American goods—a move the government has so far resisted to avoid escalating tensions. Opposition Conservatives accuse the government of weakness, with party leader Pierre Poilievre vowing to "use every trade tool available" if elected.

Meanwhile, the tariff dispute threatens to derail progress on other bilateral files, including the renegotiation of the Safe Third Country Agreement on asylum seekers and joint NORAD modernization efforts. Sources indicate that Canadian officials have warned their U.S. counterparts about the "collateral damage" to defense cooperation, though Washington appears unmoved. The State Department’s terse response—that "trade and security are separate issues"—suggests little appetite for compromise.

Broader implications for global trade

Beyond North America, the case could set a precedent for how middle powers confront economic coercion by larger trading partners. "If the U.S. gets away with labeling Canadian steel a security threat, what stops China from doing the same to Australian coal?" remarked a Geneva-based trade diplomat. Several developing nations have quietly expressed support for Canada’s position, fearing similar unilateral actions could target their exports.

The timing coincides with growing skepticism about the WTO’s effectiveness, particularly after its dispute settlement body was paralyzed by U.S. blocking of appellate judge appointments. A Canadian victory might revitalize confidence in multilateralism, whereas failure could accelerate regional trade blocs that exclude the U.S. Notably, Mexico has chosen not to join Canada’s WTO complaint—a decision analysts attribute to its separate negotiations with Washington over automotive rules of origin.

Industry braces for prolonged battle

Canadian steel producers, who export approximately $9 billion annually to the U.S., are preparing for at least 18 months of litigation. Some mills have begun diverting shipments to Asian markets despite lower margins, while others explore converting production to aluminum—which remains tariff-free. "We survived Trump’s tariffs, but this feels different," said the CEO of a major steelmaker, noting that Biden was supposed to be "the predictable partner."

Small and medium manufacturers face greater risks, particularly auto parts suppliers using specialty Canadian steel that lacks substitutes. Industry groups warn of plant closures if relief doesn’t come before Q1 2025. The federal government is considering expanded loan guarantees through Export Development Canada, though critics argue this merely socializes losses from unfair trade practices.

As Ottawa files its WTO complaint this week, all eyes turn to Geneva. The case represents not just a test of Canada-U.S. relations, but of whether any nation can constrain economic nationalism through international law. With global trade at a crossroads, the outcome may determine if the postwar trading system survives—or collapses into protectionist fragmentation.