US Metal Tariffs Could Drive Up Prices on These Goods
US Metal Tariffs Could Drive Up Prices on These Goods.
A 25% tariff is set to be implemented on all imports of steel and aluminum into the United States, thereby eliminating exemptions previously granted to goods from significant trade partners such as Canada, Mexico, Brazil, and the European Union.
The expanded tariff measures, announced by President Donald Trump and anticipated to take effect next month, will result in increased costs for many U.S. businesses seeking to import these metals.
There is a potential risk that these companies may transfer the additional expenses, either wholly or partially, to consumers.
Given that steel and aluminum are essential materials in numerous products, which items might see a rise in prices?
Canned Food, Beer and Fizzy Drinks
Approximately 70% of the steel utilized in the United States for the production of food cans is currently imported, primarily from countries such as Germany, the Netherlands, and Canada, as reported by the Can Manufacturers Institute (CMI), an organization representing can manufacturers.
Following the imposition of tariffs on steel by the Trump administration in 2018, numerous can manufacturers received "exclusions" from these import duties, despite opposition from domestic steel producers, due to the limited availability of the specific type of steel required for can production in the United States.
Since that time, steel manufacturers have further reduced their production levels, leading to increased prices, as cautioned by the CMI. Earlier this month, the CMI communicated this concern in a letter to the Trump administration, which was endorsed by major food companies such as General Mills, Del Monte, and Goya.
Robert Budway, the president of the CMI, indicated that without continued exemptions allowing can manufacturers to import steel without tariffs, the prices of grocery items, particularly canned foods produced in the United States, are expected to rise.
"While the president may believe that these tariffs are protecting the steel industry, they certainly are undermining our food security and our supply resiliency for American canned food, which Americans rely on every day," Mr Budway said.
Brewers and manufacturers of carbonated beverages, including Coca-Cola, have expressed concerns that the shift regarding aluminium will result in increased expenses, potentially leading to higher prices for consumers.
"We control enough variables that we can adapt and mitigate our way through what is happening," Coca-Cola chief executive James Quincey told investors this week.
Trump has stated that there will be no exceptions to the regulations this time, whether concerning specific products or certain countries. Nevertheless, some industries are optimistic that he may reconsider this stance.
Cars
Following the imposition of tariffs on steel and aluminum by Trump during his initial term, automotive manufacturers such as Ford and General Motors cautioned that these measures would increase their expenses by approximately $1 billion each.
At that time, Morningstar projected that the costs associated with the tariffs would lead to an estimated price increase of around 1%, translating to an additional $300 for consumers.
David Whiston, a Morningstar analyst, indicated that Ford might encounter a similar rise in costs this time; however, the impact on consumers remains uncertain.
According to Michael Wall, an auto analyst at S&P Mobility, the pressures on affordability in a market where sales have not yet rebounded to 2019 levels could restrict the extent to which companies decide to transfer these costs to consumers.
Nonetheless, he asserted that it is still "realistic" to anticipate that some of the expenses resulting from the metals tariffs will ultimately be passed on to buyers.
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He also pointed out that Trump's proposed tariffs on all goods imported from Canada and Mexico, which are currently suspended until March, would have a significantly greater effect on consumers.
At a recent business conference, Jim Farley, the chief executive of Ford, cautioned that the recent actions taken by Trump were resulting in significant costs and considerable disruption within his industry.
TD Economics has projected that the prices of vehicles could increase by approximately $3,000 if comprehensive tariffs on imports from Mexico and Canada were implemented.
Construction, Housing and Appliances
The construction sector is among the largest consumers of steel, essential for various applications ranging from structural frameworks to household appliances.
Carl Harris, the chairman of the National Association of Home Builders, expressed that the implementation of tariffs on steel and aluminum contradicts President Trump's declared objective of enhancing housing affordability. He cautioned that such tariffs would increase expenses and hinder both development and reconstruction efforts.
"Ultimately, consumers will pay for these tariffs in the form of higher home prices," he warned.
The National Association of Home Builders has called upon the president to exclude building materials from the suggested tariffs.
Following the imposition of steel tariffs by Trump in 2018, appliance manufacturer Whirlpool experienced an unforeseen increase in expenses amounting to $350 million, which it attributed to the rise in steel prices.
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Firms that cannot absorb these costs are likely to transfer them to consumers by raising retail prices.
The implementation of a 25% tariff on steel and aluminum imports is likely to have far-reaching negative consequences for American consumers. Increased production costs in sectors like canned food, beverages, automobiles, and construction will ultimately be passed on to the public, raising prices on everyday items.
Despite claims of protecting domestic industries, these tariffs could harm U.S. businesses and lead to reduced consumer purchasing power. Industries already facing financial strain, such as the automotive and housing sectors, may struggle to absorb these costs, further driving up the cost of living and undermining the government's own economic goals.
