Jefferies has lowered its outlook for the U.S. steel sector, citing an impending trade deal between the United States and Canada that would slash tariffs on certain steel and aluminum imports.
Under the proposed agreement, tariffs would fall to 25% from the current 50%, a shift that could reshape cross-border trade flows. Canada, which previously supplied roughly 22% of U.S. steel imports—primarily flat-rolled products—has seen shipments to the U.S. decline nearly 50% on an annualized basis since the imposition of Section 232 tariffs. Before 2025, Canada held tariff-exempt status and ranked as the largest steel supplier to the U.S.
The agreement would also affect aluminum trade, given Canada’s dominant role as a supplier. In 2024, the U.S. imported 3.2 million metric tons of aluminum from Canada, which has accounted for over 60% of U.S. aluminum imports in recent years.
Analysts expect uneven impacts across U.S. steel producers. Cleveland-Cliffs would face headwinds due to direct competition from Canadian steel, which represents about 15% of its volumes. Nucor and Steel Dynamics, major producers of flat-rolled steel and plate, would also be among the most negatively affected. Commercial Metals, meanwhile, sees limited direct impact, though risks remain if Mexico seeks similar tariff relief for rebar exports.
Algoma stands to benefit from a tighter Canadian steel market if exports to the U.S. become more competitive under reduced tariffs. Despite the heightened risks, Jefferies maintained Nucor as its top pick, citing inexpensive valuations at current spot steel pricing.
