Published
November 16, 2018
After more than a year of negotiations, negotiators reached a deal in October on a new trade agreement covering North America – the United State-Mexico-Canada Agreement (USMCA).
As they pursued that deal, administration officials repeatedly suggested that U.S. tariffs were imposed on imports of steel and aluminum from Canada and Mexico as a negotiating tactic. The administration also said that the tariffs would be lifted once an agreement over North American trade was reached.
And yet, there they remain.
The case to end these tariffs is strong. Doing so would bring immediate relief to farmers, ranchers, and manufacturers across the nation. The retaliatory tariffs imposed by Canada and Mexico on approximately $15 billion of U.S. agricultural and manufactured goods exports are inflicting serious harm on U.S. workers, farmers, and ranchers. Producers of pork, cheese, apples, candies, paper products, processed foods, and furniture are among those hit hard by this retaliation.
Further, Canada and Mexico are now working with the United States to combat the problem of steel and aluminum overcapacity, which has its roots in China. Both countries are allies of the United States, and their exports pose no threat to U.S. national security.
Every week the tariffs on Canada and Mexico remain in place, approximately $500 million of America’s imports and exports are affected.
Metal users see price hikes
These tariffs hurt domestic companies that are consumers of steel and aluminum. Metal prices have gone up dramatically in the last few months and are still considerably higher than prices in Europe, hurting the competitiveness of U.S. manufacturers.
Metal-consuming companies of all sizes are feeling the pinch, and these firms employ about 45 American workers for every one employed in the production of primary metals.
For a large company like Ford, the tariffs have hit their bottom line, Bloomberg reports:
“U.S. steel costs are more than anywhere else in the world,” Joe Hinrichs, Ford’s president of global operations, said Monday at an event marking the start of Ranger pickup production at a factory west of Detroit. He added that Ford is talking to the administration about the tariffs: “We tell them that we need to have competitive costs in our market in order to compete around the world.”
Ford Chief Executive Officer Jim Hackett last month called on President Donald Trump’s administration to resolve trade disputes quickly, warning that they would otherwise do more damage to the second-largest American automaker. He said the company sustained a roughly $1 billion hit to profit despite the fact that it sources most of its metals from the U.S.
Steel tariffs have also given small businesses fits:
Traci Tapani, co-president of the Wyoming Machine sheet metal shop in Stacy, MN, echoed similar concerns. She told the U.S. Chamber that as a contract manufacturer, the ability to provide stable pricing to customers is crucial.
“Tariffs are causing the raw material market for steel and aluminum to fluctuate on a daily basis, making it difficult for our customers to determine an accurate price for their products,” Tapani says.
“Our customers buy components and then assembly them into machines,” she added. “If they don't know how much those components cost, it makes it very hard for them to determine the right price for the machines they are assembling and building."
Aluminum costs frustrate craft brewers
As for aluminum, tariffs hit the growing craft beer industry at the wrong time.
The hottest trend in craft beer are “crowlers.” These 32-ounce aluminum cans let consumers buy craft beer in a more convenient package than a six-pack or a glass growler.
The crowler has been a boon to one Colorado brewer:
“As soon as we got this machine, our off premise beer sales doubled,” said Willy Truettner, co-owner of Zuni Street Brewing in Denver’s Highlands Neighborhood. “People we’re excited, and we are giving them a quality product.”
But tariffs can increased the prices of the king-sized aluminum cans:
“If the actual vessel goes up, than certainly it will affect our business,” says Truettner. “We would see an increase and that would eventually pass onto the customer.”
Even traditional, 12-ounce cans are affected by aluminum tariffs, crimping business investment, as Ryan Krill, the co-founder and CEO of Cape May Brewing, attested to The Washington Post:
Krill, who started his business in 2011, says rising aluminum prices will cost him about $30,000 this year — a big sum for a small team. “We could get a lot of miles out of that,” he said. “It’s a bit of a bummer.”
…
The uncertainty may prevent Krill of Cape May Brewing from reinvesting in his business until the long-term impact of the tariffs becomes clear.
“I appreciate what they are trying to do with tariffs,” he said. “But it definitely has unintended consequences for small businesses like ours.”
Chris Smith, co-founder of Virginia Beer Company, echoed Krill’s point, telling the Virginia Gazette, “Our prices have gone up significantly. We eat the cost ourselves, which isn’t easy. I hope it comes down soon.”
All told, the aluminum tariffs “will increase the annual cost of beer production in the U.S. by $347.7 million per year,” according to the Beer Institute.
Car makers, parts manufactuers, craft brewers, other businesses that use steel and aluminum, as well as American consumers are all in the same boat: Tariffs are taxes on all of us.
They mean higher prices for families, make American companies less competitive, and threaten jobs.
Now that we have a new trade agreement, the time is now to lift these tariffs and remove this barrier to growth.
About the authors
Sean Hackbarth
Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.
