America has seen this film earlier: President Trump, who imposed stiff rates on imported steel and aluminum on Monday, did this once earlier, in 2018. So domestic industries have a fairly good idea of how the story ends.
Manufacturers of trucks, devices and construction equipment climb to find American sources of metal inputs, making steel and aluminum producers busier than before. Companies that need specific alloys that are not made in their own country are forced to pay more. Prices rise, making end products more expensive.
But there can be plot twists on the way. Will Mr. Trump deals with some countries, so that large shipments can be allowed without the new tasks? Will he set up a process to give companies a postponement if they can demonstrate hardships? (On Monday, an official of the White House said that there would be no exclusions.)
All they can influence the outcome, so steel users go carefully. Angela Holt, who runs a precision operating company and leads the board of the Indiana Manufacturers Association, says that the potential effects on companies are 'complex'.
“It can not only influence the costs, but also the availability, depending on their situation,” said Mrs. Holt. “It is very varied, even among industries – I think it will depend on an individual basis where they involve their materials, what the competition looks like.”
Lessons from last time
Although the American steel and aluminum industry is much weaker than in their heyday in the 1970s, American companies import only about 26 percent of the steel they use, according to the International Trade Administration, and that number has fallen.
At the same time, end users looking for alternatives for foreign suppliers can have options. American iron and steel producers work just about 70 percent capacity. The first Trump administration wanted to be up to 80 percent and did this briefly. But too expensive Chinese exports have taken a toll in recent years from domestic producers, forcing older, less efficient mills to close and leave others with fewer orders than they can handle.
Also, primary metal rates do not seem to be fully passed on to consumers. According to a 2020 study by economists at Columbia University, Princeton University and the Federal Reserve Bank of New York, foreign exporters absorbed about half of the 2018 steel rates, reducing their prices to retain access to the American market .
Yet that does not mean that prices will not rise. In 2023, the US International Trade Commission found that these rates increased the steel and aluminum prices on average by 2.4 percent and 1.6 percent. Perhaps the shares of US metals processors such as Nucor, Steel Dynamics and Cleveland-Cliffs are on Monday, awaiting the rate announcement of Mr Trump.
“I think the big collection meal is that there were many electric industries that were affected,” said Alex Durante, a senior economist at the Tax Foundation who wrote about the economic impact of rates. “The most important effects weighed heavier than the positive effect on steel and aluminum producers, the smelters and refineries.”
There are also reasons to think that the impact can be worse for metal users this time.
The American production is in a delicate condition, muted by high interest rates and a strong dollar that makes export less competitive. Unemployment remains low and as the Trump administration falls in the context of immigration, labor can become more expensive. Steel and aluminum prices enriched during the COVID-19 Pandemie and have not yet fallen to their earlier levels.
That is why extra rates can have a greater impact if they are stacked at the top of the over-the-line rates on Canadian import, which Mr. Trump said they can come into force on 1 March.
“It contributes to a number of things that already have stress on a tight macro -economic situation,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
Tins, houses, cars
For an idea which industries can be influenced the most by new rates, it is useful to see how important steel and aluminum are for their production.
As part of its report on the impact of the Trump rates of 2018, the International Trade Commission industries ranked by their dependence on the two metals. A kind of company that uses most steel is metal voices of motor vehicles, with 58 percent, with other components of automatic production that also use quite a bit.
Although many of the steel that car manufacturers use is produced in the United States, those companies and their suppliers also depend on specialized alloys that are only available to foreign producers. Almost all car manufacturers would be affected, including Tesla, who applied for an exemption from rates in 2023. The company told officials that it only needed steel from abroad, reportedly for the cyber truck, which has a stainless steel body. (The stock price of Tesla fell by 3 percent on Monday.)
Many car manufacturers already have difficulty staying profitable in the light of increased competition from Chinese car manufacturers and the costs for developing electric models. Rates for goods from Mexico and Canada can damage the creditworthiness of some manufacturers – in particular Nissan and Stellantis – according to Fitch Rates, which assesses company finances.
Next for dependence on steel: buildings. Commercial construction and large apartment buildings require a lot of reinforcement steel – a steel reinforcement in concrete – that can add a lot to the account for developers. Carl Harris, the chairman of the National Association of Home Builders, noted on Monday that Mr. Trump had said that he wanted to make homes more affordable.
“His switch to impose 25 percent rates on all steel and aluminum products that are entirely in congestion of aluminum in the US runs in conflict with this goal by increasing housing costs, new development and frustrating efforts to rebuild in The aftermath of natural disasters, “said Mr. Harris,” said Mr. Harris, “said Mr. Harris,” Mr. Harris said, “said Mr. Harris. In a statement. “Ultimately, consumers will pay these rates in the form of higher house prices.”
A sector that does not use steel, but a lot of aluminum is brewing and bottling soft drinks. In 2018, when aluminum rates were set at 10 percent, according to the American Beverage Association, they added half a billion dollars to production costs.
Aircraft and bridges?
The impact on other industries is unclear.
Higher aluminum prices can, for example, influence Boeing. The company is already behind schedule on Jet deliveries after a quality crisis and extended strike of employees last year. In a recent effects of effects, it said that rates, in particular on aluminum and titanium, can mean that the company “would not be able to deliver one or more of our products in time or against budgeted costs.”
But when Mr. Trump imposed comparable limitations on aluminum and steel in 2018, Boeing and his top supplier, Spirit Aerosystems, said the effects were limited.
Boeing's Chief Executive at the time, Dennis Muilenburg, said at an investor conference that the company bought about 90 percent of its aluminum in the United States, adding that Boeing “was not considerably exposed”. The company and its suppliers also use consortia and long -term contracts to safely find and stabilize the prices of raw materials.
Another large metal user is the federal government, through the construction and repair of railways, bridges, submarines and aircraft carriers. Most of these are already mandatory to use steel and aluminum produced in interior, but rates can also increase those prices.
Rates can also feed in the price of energy, both based on fossil fuels and renewable. Drilling equipment and pipelines for oil and gas are made of steel and aluminum, just like racks for solar panels and towers for wind turbines. And building new transmission lines, which are needed for both types of energy, would become more expensive.
Energy companies can bypass rates by buying those finished goods from abroad. But that would undermine the purpose of the BIDEN administration for the development of renewable energy that used parts and equipment produced in their own country, which had fueled a small tree in the factory construction of the American factory.
Jack Ewing” Niraj Chokshi And Rebecca Elliott contributed reporting. Susan C. Beachy contributed research.
