Hello, everyone. Today's discussion centers on the US steel and aluminum tariffs. I must say, this seems like a real rookie mistake. Imposing tariffs on inputs rather than outputs is a flawed strategy. US consumers don't directly purchase steel or aluminum, nor the byproducts of imported steel and aluminum. Instead, they buy goods whose value has been increased multiple times by various companies after the initial input was taxed.

We've been down this road before. In 2018, the US imposed similar tariffs on the same countries. We have case studies available that detail the effects of those tariffs. What happened was that US producers overbuilt capacity, leading to a significant bubble. Demand only rose modestly, covering just a fraction of the additional capacity. Prices soared, outpacing the additional production created within the United States. The intended effect of shifting consumption by US manufacturers from imported, mostly Canadian steel to US steel did not materialize. Manufacturers simply moved down the list to the next cheapest alternative, finding esoteric supply chains to substitute Canadian steel.

This cycle created a boom and bust scenario, harming US steel producers and manufacturers, with the benefits never materializing.

Now, we're considering doing this again. Look at the shale industry. After experiencing a boom and bust cycle, prices rose, and they decided against building additional capacity. They learned from past mistakes and chose not to repeat them. Similarly, US steel and aluminum producers are unlikely to respond to tariffs by expanding capacity. They won't rush to build new refining facilities or start extracting iron ore in Alabama and Mississippi again.

US steel and aluminum producers have found a different market than imported Canadian steel. They have a comparative advantage in quality and time to market. An entire industry exists to provide overpriced cut steel pipe quickly. They charge high prices but deliver swiftly, serving niche markets that require specific products urgently. These producers won't abandon their market to shift to low-end, low-margin steel production. Instead, they'll charge more for the same services, maintaining their market niche.

If policymakers would read the case studies, they'd see the flaws in their approach. This isn't a team setting goals and finding experts to implement policies effectively. They're experimenting with a multi-trillion-dollar economy and industries, relying on gut feelings and untested solutions. This approach is unlikely to enhance US competitiveness or yield material benefits.

There's an argument for increasing US domestic steel production for national security reasons. However, this argument is flimsy. To achieve this, investment vehicles and programs are needed to de-risk production expansion. It's similar to what was done with the CHIPS Act, which de-risked chip production in the US, incentivizing companies to take risks before demand was fully reliable. The US government showed a long-term commitment to purchasing US-made goods, even at higher prices.

For national security, it's beneficial to have Canada, our largest trading partner and ally, export all their steel, aluminum, and oil to the US. The US industrial policy over the last five decades has tailored supply chains to serve the US market. Forcing Canada to find alternatives would be counterproductive. We want to maintain strong trade ties, ensuring that Canadian industries continue to supply the US, enhancing both economic and national security.