Americans’ concern of rising prices for certain goods has been heightened recently with the imposition of a 25% tariff on the importation of aluminum and steel into the country. These new policies, which began on Wednesday, no longer provide exemptions for major trade allies such as Canada, Mexico, Brazil, and the EU. These limits, as stated by Donald Trump, suggest that a bulk of American industries will deal with higher cost burdens of importing these essential metals.
These tariffs are not unilateral; Trump had placed these on Mexico and Canada as well, although he did give product exemptions for auto manufacturers. In addition, these restrictions were accompanied by a 20% tax on many products imported from China. To counter these tariffs, the EU has announced restrictions on roughly $26 billion worth of American goods.
As companies deal with these increased costs, it poses a new challenge of pricing. These materials are fundamental to an array of businesses and their final products. Because of this, price inflation could be a reality for many different types of goods.
The Can Manufacturers Institute (CMI) estimates that 70% of the steel utilized in American food cans comes from Germany, Netherlands, and Canada. After Trump’s first steel tariffs in 2018, many can manufacturers were granted allowances to import steel with no tariffs. However, domestic steel production has decreased, and prices have increased. The CMI, which is supported by General Mills and Coca-Cola, stated that without the exemptions, canned goods prices may increase to a large extent.
In the beverage industry, Coca-Cola also noted that these aluminum tariffs may have negative consequences, stating that these expenses will ultimately have to be dealt with by customers. CEO James Quincey acknowledged the changes but stated that they will have to deal with these challenges.
In the automotive industry, Ford and GM previously projected that tariffs would collectively increase their costs by up to $1 billion. Experts believe the average consumer may expect price increases of about $300 per vehicle. Some analysts suggest that while these expenses will definitely need to be shouldered, affordability will determine how much these manufacturers will choose to pass on.
Due to the steel tariff costs, the construction industry, which is a heavy user of steel, will likely be affected. The National Association of Home Builders warned that the tariffs are in stark contradiction with Trump’s objectives of making housing affordable. More importantly, they increased spending will always be transferred to the consumers through elevated home rates. After the first steel tariff in 2018, Whirlpool Corp, an appliance company, reported that they had incurred an additional charge of $350 million due to the increase in steel cost. This goes to show how many despairing companies will attempt covering their expenses and many companies “absorbing” will no longer be steps of these costs are passed on to consumers.
The bottom line is that the new tariffs on metal will balance the level of American goods, like canned food, automobile, and housing at a lower quality which will increase the prices consequently.
