The U.S. government previously imposed tariffs on Chinese imports of aluminum and steel, and has now extended similar tariffs to Mexico, Canada and the European Union. These allies and trade partners have vowed to implement their own tariffs on U.S. imports in hopes the United States will ease off these changes. In the short term, businesses are likely to pay higher costs to get the materials they need, but they’ll eventually have to adjust their business practices to handle the new reality of import tariffs. All of this change has analysts questioning how this will affect manufacturers of these metals and companies that rely on these metals to make their finished products.
Companies That Will Benefit from Tariffs
With less external competition to undercut their pricing, American steel companies will have a more attractive pricing model for their U.S. customers. This can also help them set pricing at levels more conducive to increasing their bottom line.
Foreign steelmakers that import to Canada, Mexico or the E.U. will not be subject to the same tariffs as U.S. imports to these regions, giving them the advantage of lower costs to customers.
American aluminum companies will have a higher demand for their product, leading to more jobs and more leverage in setting pricing with partnering companies.
Companies That Won’t Benefit from Tariffs
Beer, soft drink and other beverage companies that package their drinks in aluminum cans will have to either absorb the cost of the new import tariffs, go with a potentially pricier domestic provider or pass along their new costs to the end consumer.
On the reverse side of the argument, American aluminum companies may feel negative effects of the tariffs. Many U.S.-based companies focus on handling near-finished aluminum rather than producing and refining the raw metal. They rely on imports to handle the early stages of production, meaning they’ll need to continue to absorb the cost of tariffs to get the partially finished product to their facilities.
As an industry, American automakers will likely pass the cost of these metals on to the end consumer. This could see economy cars increase in cost by a few hundred dollars while luxury cars could cost upwards of $10,000 more than current price points.
The White House administration has stood firm that renegotiated trade deals with NAFTA partners and abroad can make these steep tariffs go away, so it remains to be seen how the metal manufacturing landscape will change in the long term because of tariffs on imports. Does your business deal heavily in imports of steel and aluminum? Are you putting together a plan to absorb changes in operating costs? Share with us in the comments below.