The unsung heroes in modern society are steel and aluminum.
These metals are the foundation of many products and industries. From your stainless steel fridge in the kitchen to your aluminum cans at home, they form a solid base.
These are the essential parts of everything, from automobiles and planes to frying pans and skyscrapers.
This seemingly normal reality, however, is under threat.
The 25% tariffs that President Trump imposed on steel and aluminum imports took effect today, creating a potential for economic chaos and affecting the pockets of Americans across the nation.
Costs and uncertainties in construction are increasing
A report by Associated Press states that the construction sector, which represents approximately one third of US steel shipments is especially vulnerable to these tariffs.
According to Associated Builders and Contractors (a trade association with over 23,000 members), the industry depends on a global supply chain for everything from schools and airports to roads and bridges.
Although some contractors managed to lock in prices for steel and aluminum before the tariffs were implemented, the prolonged imposition of import taxes is likely to lead to increased costs. This comes at a moment when construction companies are already struggling with the rising cost of labor and material.
The uncertainty around tariffs will likely discourage businesses from undertaking large-scale construction projects. This could stifle growth and innovation.
Annie Mecias Murphy, co-owner of JA&M and President, a Florida-based commercial contractor, echoes the concerns.
Rebar and post tension cables are used extensively by her company to strengthen concrete.
Mecias Murphy told Associated Press that she tried to “lock in” her prices, and worked with clients and trade partners on various strategies.
The rising cost of large multi-year project makes it impossible for me to consider them.
The cost of groceries could increase
Steel cans are a small but important part of American consumer life. The tariffs have a far-reaching impact on the lives of American citizens.
Imports are a major factor in the production of tin mill steel used to make a variety of products, from hairspray cans and soup cans.
According to the Can Manufacturers Institute, approximately 70% of US tin-mill steel is imported.
The Institute warns that Trump’s more limited tariffs in 2018 led to the closing of nine US tin-mill lines as the manufacturers switched over to steel of other types or shut their doors.
In the US, today only three tin-steel lines are still in operation.
In a recent earnings call, Mick Beekhuizen stated that The Campbell Co. imports tin-mill steel from Canada.
Beekhuizen, who is working closely with Campbell to minimize the tariff impact, acknowledged that it may have to increase prices and pass the costs onto the consumer.
The Consumer Brands Association (which represents the packaged food industry) is urging Trump’s administration to exclude aluminum and steel that aren’t readily available within the US in sufficient quantities, according to Associated Press.
If this is not done, the association says that American households will be forced to pay more for their groceries.
Tom Madrecki is vice president for supply chain resilience at Consumer Brands Association.
Auto industry
Experts warn that even though Ford, GM and Stellantis already source most of their steel and aluminum from domestic suppliers, the tariffs may still result in higher prices to consumers.
Any shortage of supply will likely increase prices, which could lead to higher vehicle costs.
Tesla, Elon Musk’s automaker, could also feel the impact of tariffs. Tesla’s Chief Finance Officer Vaibhav Taniaja mentioned the tariff uncertainty during a call with investors in January.
Taneja, a representative of Associated Press told the news agency that “the imposition of tariffs…will have an effect on our business, profitability, and sales,” highlighting how vulnerable the manufacturer of electric vehicles is to trade policies.
The situation could be particularly detrimental for American auto buyers who are already struggling with high costs and economic insecurity.
Kelley Blue Book reports that the average price of a brand new car was $48,000 in January.
Automakers will likely revisit their financial forecasts this year, as they prepare for any potential impacts on their bottom line.
From microwaves to Espresso Makers
The rising cost of appliances is also a challenge for manufacturers and retailers of home appliances. These include everything from espresso machines and toaster ovens, to microwaves, dishwashers, and more.
Due to the fact that they rely on local production, some companies like Whirlpool seem to be better protected from tariffs.
Whirlpool executives said at an investor’s conference held earlier in the month that they have locked-in contracts with most of their raw materials including steel for a period of one to two years.
Roxanne Warner is a senior Vice President and Controller at Whirlpool. She told Associated Press that the company was in a good place right now.
Other retailers have already felt the impact.
Richie Palmero is the small appliances buyer at Abt in Glenview. Richie Palmero says that Abt received notices from the manufacturers that suggested retail prices for countertop products would increase 10% to 15% on April 1.
Abt offers coffeemakers ranging in price from $100-500, and espresso machines priced between $1,000 and $5,000. Palmero, however, acknowledged that a small increase in the cost could have a significant impact on consumer behaviour.
Palmero said that while adding $250 to a $2,500 price is quite a bit, she does not think it will have a significant impact on sales.
Historical precedent also informs the potential impact on appliance manufacturers of tariffs.
According to an American Economic Review study, when tariffs on washing machines were introduced in January 2018 under Trump’s presidency, the prices of the appliances increased by 12%.
Tariffs have also increased the price of clothes dryers.
Are you a fan of aluminum or are you a beverage lover?
US beverage companies use more than 100 billion cans of aluminum each year. This shows the value this metal has for the industry.
Can Manufacturers Institute reports that while most thin-rolled aluminum sheets used in cans are manufactured domestically, a small portion of can manufacturers’ supply is imported.
According to the Brewers Association which represents independent US craft beers, 10% of US aluminum cans come from Canada.
This association says that steel tariffs are driving up equipment costs like fermentation tanks and kegs. Aluminum tariffs force small brewers into paying more for cans.
Aluminum tariffs are not a concern for all beverage producers.
Molson Coors stated it has shifted its production over the past few years, and sources now “almost” all of its aluminum in US for consumption.
James Quincey, Chairman and CEO of Coca-Cola, downplayed any potential effects from the tariffs in a recent earnings report, saying that Coke could switch to plastic bottles if the aluminum cans became more expensive.
The US has also said that tariffs are not necessarily a blow to US businesses, as they have faced similar struggles with costs and will continue to do so.
Quincey was quoted by Associated Press as saying, “You shouldn’t conclude this is a huge swing factor for the US market.”
Costs are involved. This will need to be managed. We will manage it. It’s better to not have this in the US.
Aviation faces disruptions in supply chains
Tariffs pose a significant challenge to the aviation industry which is characterized by global supply chains, complex components and specialized parts.
Metal parts are found in many different parts of an airplane, from the aluminum frame, the wing, or door panel to landing gear, engine, and steel parts.
These parts can be sourced overseas and many are highly specialized.
Aerospace Industries Association (Aiia), which represents more than 300 aerospace and defence companies, warned that tariffs would put the industry, and national security, at risk.
Dak Hardwick told Associated Press that the organization’s vice-president of international affairs was concerned by additional downward pressure.
We’re looking at mitigation strategies to minimize the impact of tariffs. And we want to work closely with the Trump Administration in order to emphasize the important role that our industry plays in America’s national security, economic prosperity and deterrence.
Tariffs have the ability to increase costs, disrupt supply chains and create volatility in the market.
Businesses and consumers will both need to adjust to the rapidly evolving economic environment as these policies are implemented.
As new information becomes available, this post may change.
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