Tariff Blitz: How Section 232 and Retaliatory Duties Are Crushing Algoma Steel and Forcing Layoffs

The new tariff environment shattered Algoma Steel's export business. The U.S. Department of Commerce slapped a 50% duty on 407 steel and aluminum derivative products, including key machinery and wind turbine components, while Canada immediately responded with its own 25% surtax on U.S. steel imports according to Canadian border officials. These double-layered taxes made Algoma's products far more expensive for buyers across the border, collapsing demand and export volumes almost overnight.

This pricing shock directly translated into sharp financial losses. Algoma Steel reported revenues falling 46.7% to just $567.8 million in Q3 2023, alongside a $69.8 million net loss. Shipments dropped 17% to 458,341 tons that quarter, as customers shifted purchases away from the now-higher-priced Canadian steel. While the company cited plate mill modernization delays as a factor, the tariff-induced price surge was the dominant force crushing competitiveness in its core North American markets.

The revenue plunge crippled Algoma's profitability. Despite maintaining a $245 million cash balance, the company swung from profit to a $65.7 million operational loss and a $69.8 million net loss in the quarter. The tariffs didn't just reduce sales volume; they fundamentally distorted pricing power, forcing Algoma to absorb steep costs or lose its primary market. Even with plans to modernize its steelmaking process by mid-2024, the immediate damage to export demand was overwhelming and directly measurable in the quarterly results.

Financial Strain and Operational Shifts

Algoma Steel's Q3 2023 results revealed deepening financial pressure. The company posted a $65.7 million operational loss and nearly $70 million net loss, largely due to sharply lower steel prices and reduced output. Shipments tumbled 17% to 458,341 tons as modernization delays hampered production.

This performance triggered immediate workforce actions. The firm announced 1,000 layoffs – roughly one-third of its Sault Ste. Marie workforce – citing the combined impact of weakened competitiveness from U.S. Section 232 tariffs and the costly shift to new electric arc furnace (EAF) technology. While the transition aims to slash carbon emissions by 70%, it demands significant upfront investment.

The EAF conversion is partially bankrolled by $500 million in government funding, but this doesn't alleviate near-term cash flow strain. The delayed blast furnace shutdowns and modernization work mean revenue remained depressed at $567.8 million for the quarter, down 46.7% year-on-year. Though Algoma maintained a $245 million cash balance and continued its $0.05 per share dividend, the scale of the losses and restructuring costs signals ongoing financial vulnerability. Unions warn the layoffs and plant retooling threaten the long-term stability of the local industrial base, with job reallocation uncertain as the company navigates market volatility and the lengthy EAF transition process. The combination of recent losses, delayed shipments, and the high cost of modernization creates a backdrop of sustained operational and financial risk.

Employment Impact and Industry Context

One Canadian steelmaker felt the sector's struggles acutely. Algoma Steel announced 1,000 layoffs in March 2026, eliminating roughly one-third of its Sault Ste. Marie workforce. These cuts stem from the U.S. Section 232 steel tariffs undermining competitiveness and finances, compounded by a costly shift to electric arc furnace (EAF) technology. While $500 million in government funding supports this modernization, the closure of blast furnace operations has triggered significant job losses and ongoing uncertainty about reallocation according to industry analysts.

This local shock reflects a broader national trend. The Canadian iron and steel manufacturing sector has shed jobs steadily, employing 12,013 workers in 2024 – a 4.4% average annual decline since 2019. Smaller firms are becoming the norm, with the average workforce shrinking to 106.5 employees in 2025, down from 112.3 the previous year. These structural shifts suggest persistent pressure on employment according to industry reports.

Despite these workforce reductions, the industry faces another challenge: labor shortages. Even as productivity has risen – evidenced by growing revenue per employee over the past five years – demand for skilled workers remains tight. This contradiction highlights the sector's ongoing difficulties, including regulatory hurdles and the lingering effects of the pandemic, further complicated by global market dynamics like the Section 232 tariffs that contributed to Algoma's crisis.

Downside Risks and Compliance Challenges

Algoma Steel now faces a dual tariff threat that could shrink its export markets by 15-20%, according to trade analysts. U.S. enforcement now targets 407 steel and aluminum derivative products-including heavy machinery-with a 50% duty on metal content, directly affecting North American exporters like Algoma. This follows Trump-era measures to strengthen tariffs, escalating U.S.-Canada trade tensions and reducing export competitiveness according to trade analysts. Canada's 25% retaliatory surtax compounds the problem. The policy applies to all U.S.-origin steel, aluminum, and auto imports, requiring commercial importers to prove non-U.S. origin to avoid duties. For Algoma, which relies on U.S. coal and scrap for its electric arc furnaces, this creates compliance headaches and hidden costs. Even products not originally made in the U.S. face scrutiny if they contain American-sourced materials, according to Canadian border officials according to Canadian border officials.

These tariffs strain Algoma's thin margins after a 46.7% revenue plunge in late 2023. While the company still holds $245 million in cash, persistent losses since 2022 could deplete this buffer if export markets shrink further. The 70% emissions reduction goal from transitioning to electric arc furnaces requires billions in new investment-funding that may evaporate under sustained tariff pressure. Even if production normalizes by mid-2024, cash flow volatility now threatens both compliance and decarbonization timelines according to financial reports.

The riskiest scenario combines prolonged tariffs with delayed carbon target achievement. If U.S. duties block access to European markets while Canadian surtaxes raise input costs, Algoma's path to profitability narrows sharply. The company's ability to absorb these shocks depends entirely on its cash position holding until emissions cuts deliver tax credits and market premiums-a timeline that may stretch beyond 2025 if regulatory hurdles delay furnace modernization.