U.S. to Impose Steep Aluminum and Steel Tariffs

The U.S. government unveiled controversial plans on Thursday to place 25 percent tariffs on steel imports and ten percent on aluminum as another step to revive domestic manufacturing. But the Wall Street Journal reported that the move drew quick protests from a number of American metal fabrication industries, including beer and boat manufacturers that use aluminum, as well as big users of steel that build automobiles, heavy machinery, agricultural equipment, air conditioners, chemical processing systems, oil pipelines, tooling and more.

The decision has opened rifts between the government and traditional free-trade supporters who want to avoid taking such action. “These huge tariffs on all kinds of imported steel is a big mistake that will increase costs on American consumers, cost our country jobs, and invite retaliation from other countries,” said Republican Senator Pat Toomey of Pennsylvania. The move also drew complaints from overseas allies and trading partners, with warnings that such action could prompt them to retaliate. To read the entire WSJ article, please click here.

“Steel is the largest input cost for big machinery producers, accounting for around 65 percent of raw material expenses at Caterpillar Inc. (Peoria, IL), with aluminum adding another 10 percent,” according to Ann Duignan, an analyst at JPMorgan Chase & Co. (New York, NY), who estimates that other agricultural equipment makers, such as Deere & Company (Moline, IL), are even more exposed to raw material inflation, unless they can claw back costs through higher sale prices.

The Fabricators & Manufacturers Association, International (FMA; Elgin, IL), which represents 1.4 million people employed in U.S. metal fabrication industries, expressed their concern with the move. “One likely result of this action is to add headwinds to the market for American-made fabricated metal product producers. Just when this market had some sustained momentum, the specter of retaliatory duties and tariffs now hangs over this important manufacturing sector,” said Ed Youdell, the president and chief executive officer of FMA. “The association is concerned that jobs and job creation are at risk; those countries affected by this announcement will likely choose to circumvent the tariffs by producing and exporting low-cost fabricated metal parts rather than exporting steel and aluminum.”

Phil Kooima, the president of Kooima Company (Rock Valley, IA), an agricultural machinery manufacturer, agreed: “This proposed tariff will disproportionately harm U.S. metal fabricators,” he said. “Rising steel costs at home, but not in the world market, favors the importing of fabricated metal products from overseas suppliers. A better policy would be to import low-cost steel coil and plate and produce the fabricated products here in America. There are many more fabricating jobs here in U.S. than steel mill jobs so it is disappointing to have the president choose to help one industry over another.”

Polaris Industries Inc. (Huntsville, AL),which buys more than $300 million in steel and aluminum each year to make off-road vehicles, snowmobiles and motorcycles, “doesn’t expect tariffs to significantly increase our costs,” said chief executive officer Scott Wine, as reported by WSJ. However, Wine is concerned that duties or retaliatory trade barriers would lead other manufacturers or agricultural companies to lay off workers that buy his company’s products: “President Trump has been a phenomenal supporter of jobs in the U.S., and this would not be in line with his previous efforts,” he added.

www.wsj.com, www.fmanet.org