OPINION:
After trade talks with Ottawa collapsed in August, new tariffs went into effect on roughly $20 billion of Canadian goods — with additional customs duties scheduled to start on Jan. 1, 2027.
As the Trump administration continues to leverage tariffs as a negotiating tool, it would do well to refine the tactic, because some domestic industries are getting caught in the crosshairs.
The U.S. does not produce enough steel and aluminum to meet its own needs, which include domestic consumption and export markets, and the titanic infrastructure required to produce these metals means production capacity cannot be changed easily. It takes massive investment and several years to build mills, smelters and refineries.
As I argued last spring and again this summer, because we cannot quickly increase domestic production of these metals, costs have increased for all industries that use them, despite the rapid implementation of steep tariffs.
The humble can of food illustrates the debacle, including how, ironically, foreign companies are benefiting.
Tin mill steel (the tinplate from which food cans are made) accounts for roughly 2% of American steel production, with only three domestic lines in operation today. Thus, can makers import 70% to 80% of what they use. Because food producers have no domestic, tariff-free alternative, importers are passing the cost of the tariffs on to the food companies.
Canada is a principal supplier of tin mill steel, so recent Canadian tariffs have been passed on to American companies. We are not talking trivial sums here.
Campbell’s told investors that tariffs would account for about 4% of its cost of goods sold in fiscal 2026. Conagra put its tariff impact on the cost of goods sold at 3%, or more than $200 million a year. That has already translated to higher prices at the consumer level.
According to the consumer price index, canned fruits and vegetables rose in price more over the past year than frozen varieties did because the latter are packaged in bags rather than metal cans. Likewise, the price of canned ham rose faster than its non-canned counterpart.
Arguably worse is the counterproductive arbitrage these tariffs have created.
Under current Section 232 tariffs, an empty steel can imported into the U.S. is a derivative product and is subject to the customs duty. A can filled with peaches in Greece or tuna in Thailand enters as food and pays no Section 232 tariff. This inflates the cost of the American canner’s supplies while exempting the foreign competitor.
This phenomenon, sometimes called tariff inversion, benefits foreign companies while hurting American consumers. In the first five months of 2026, imports of tin mill steel fell. Meanwhile, canned food imports rose in the months after the announcement of the metal tariffs.
Fewer cans were made and filled here, replaced by full ones arriving from abroad, including from China.
Although tariffs can serve as a powerful negotiating tool to reduce trade barriers, the current slapdash implementation has created a bizarre situation in which a can made and filled by an American food producer has a higher effective tariff rate than a can made and filled abroad.
American canners have asked for relief since 2018 but received none. Since then, more than a dozen domestic fruit and vegetable canners have gone out of business.
Earlier this year, Del Monte closed its fruit cannery in Modesto, California, resulting in the loss of 600 full-time jobs and up to 1,200 seasonal jobs.
It is clear that the American canning industry is being exported rather than protected. The simple fix to meet domestic demand is to end the steep tariffs on things the U.S. cannot quickly make here. Tinplate from allied suppliers should be excluded from Section 232 tariffs until sufficient domestic capacity exists.
If the tariff remains, at least make it coherent by also classifying the foreign-filled can as a derivative product.
Ideally, tax and regulatory reform would make it so advantageous to build in the U.S. that the tariffs would not even be necessary. Yet the current system of taxing inputs while exempting finished goods is the worst of both worlds. Ultimately, Chinese manufacturers win.
Most important, to rebuild capacity, use rewards rather than penalties. Tax and regulatory reform, along with targeted, time-limited production incentives that phase out as capacity comes online, tell a firm what to build. A tariff tells it only what not to buy.
Furthermore, for every American in steel production, roughly 80 work for manufacturers that use steel. In aluminum, the ratio is more like 180-to-1. More Americans work in canneries than in all U.S. steel mills.
A penalty on metal hits that larger workforce immediately, while any gain to producers arrives years later, if at all.
Many Americans want safe, affordable canned food grown and produced here, but unfortunately, the current tariff structure favors foreign food production.
• E.J. Antoni, Ph.D., is chief economist at The Heritage Foundation and a senior fellow at Unleash Prosperity.
Please read our comment policy before commenting.