Steel coils illustration for tariffs article

Hot Topic: The Impact of Trump’s New Steel and Aluminum Tariffs

It’s front page news all over the country: the impact of the newly imposed tariffs on steel and aluminum. And why not? These two metals are used in countless products we use every day, from the cars we drive to buildings in which we live and work.

In fact, the auto and construction industries are expected to be the hardest hit by these tariffs according to a blog post in the Economists Outlook published by the National Association of Realtors. An online round-up article from CNBC included a stern warning from the American International Automobile Dealers Association, “Both metals are crucial to the production of cars and trucks sold in America today and would raise the sale prices of those vehicles substantially.”

Multiple Industry trade associations across the country have been some of the first to weigh in on the tariff announcements. As expected, the Aluminum Association and the American Iron and Steel Institute (AISI) had high praise for the tariff decision. A quarter of domestic steel capacity goes unused, affecting thousands of U.S. jobs, according to AISI President and CEO Thomas J. Gibson. “We thank the president for meeting with our industry and following through on his commitment to addressing the steel crisis,” Gibson said.

The article in Associations Now magazine goes on to note that other associations further down the supply chain are not so happy and feel the tariffs are “shortsighted.” It cited several sectors that will suffer, including manufacturing, retail and even beer! (Most beer cans are made of aluminum.)

One manufacturing group that is disappointed in the news is the Air-Conditioning, Heating and Refrigeration Institute (AHRI), which represents 320 manufacturers of HVAC equipment. Officials said tariffs will not help its industry or the country overall. “As major users of steel and aluminum, we have been proactive in explaining to the administration that the HVACR and water heating industry would be negatively impacted by an increase in tariffs, as would the consumers that rely on the products we manufacture,” said AHRI President and CEO Stephen Yurek.

The Air Conditioning Contractor’s Association (ACCA) also weighed in about concerns over the increased costs of HVACR equipment caused by tariffs on steel and aluminum. With equipment price increases into double digits, these tariffs are negatively impacting professional contractors and consumers.

The chief executive officer of the Associated General Contractors of America (AGC), Stephen E. Sandherr, released the following statement in reaction to President Trump’s tariff announcement:

“These new tariffs will cause significant harm to the nation’s construction industry, put tens of thousands of high-paying construction jobs at risk, undermine the President’s proposed infrastructure initiative and potentially dampen demand for new construction projects for years to come.  That is because the newly-imposed tariffs will lead to increases in what construction firms are forced to pay for the many steel and aluminum products that go into a typical construction project.”

In fact, according to AGC construction costs accelerated again in May 2018, with steep increases for a wide range of materials,. Those materials include many that are subject to tariffs that could drive prices still higher.

The AGC’s chief economist, Ken Simonson noted, “The cost of all goods used in construction rose 8.8% from May 2017 to May 2018, the steepest annual increase in nearly seven years. Moreover, tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”

A recent article in Real Estate Investor also noted that the tariffs are already putting pressure on commercial construction pricing – some in the sector say they have seen around a 10% increase in the price of steel since the first round of tariffs were announced in March.

A blog post from Oldcastle Building Solutions, however, says the jury is still out on the tariff’s impact on the construction industry and prices due to the recent round of temporary exemptions to major steel producing countries, including Canada, Mexico, the European Union, Australia, Argentina, Brazil, and South Korea.  It is estimated that the countries with the temporary exemptions account for more than 60% of all steel imports. Therefore, depending on what ultimately gets negotiated with these countries, the tariff increase might end up being insignificant.

The cover story in the June issue of SNIPS magazine also takes a in-depth look at the impact of the tariffs on the HVAC and sheet metal industry. From residential contractors to machinery makers, the sheet metal and HVAC industry is girding for the effects of the Trump administration’s decision to levy a 25% tariff on imported steel and a 10% tax on aluminum.

In one example, the article cites officials at a 144-year-old steel distributor that specializes in HVAC and ductwork fabrication products who were preparing for some potentially difficult conversations with customers. “We can’t always provide all the steel our customers need at the price they’re expecting,” said Robbie Thompson, the president and CEO at Conklin Metal Industries.

However, the article also quotes some contractors as saying the key with the new tariffs is being proactive and prepared.  Cleveland-based Majestic Steel USA supports the president’s decision to enact tariffs, but also acknowledges the uncertainty they can mean for customers. “The No. 1 thing this has impacted has been availability,” said Alex Evans, market development director at the steel distributor and service center. “If you didn’t prepare, you’re facing some really steep price increases depending on how frequently you buy.”

Statistics show that the United States imported $47.83 billion of steel and aluminum commodities in 2017 on product types for which tariffs will be imposed, split between $29.1 billion for steel and $18.73 billion for aluminum. However, the effect will vary by commodity or industry.

From the depth and breadth of coverage on this issue from all sides, it looks like the debate on the new steel and aluminum tariffs will not be subsiding anytime soon.

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