Downstream US manufacturers and other steel consumers are mostly decrying President Donald Trump’s imposition of widespread tariffs, Kallanish detects.
The Coalition of American Metal Manufacturers and Users (Cammu) bluntly states that the broader application of Section 232 tariffs, with no obvious exceptions, increases costs at US factories, pinches supply of basic materials and harms US competitiveness.
“Re-imposing 25% tariffs on steel and aluminum imports from our allies and without a workable exclusion process puts US manufacturers directly in harm’s way,” Cammu writes in a statement.
“For the past six years, Section 232 tariffs have driven up steel and aluminum prices, even for manufacturers sourcing domestically,” the coalition explains. “Lead times for these critical materials have also increased. As a result, US manufacturers are paying significantly more for steel and aluminum than their global competitors, undermining their ability to compete.”
Even American conservative allies of the Republican party agree on the net negative of relying on tariffs to achieve broad policy goals.
“We have far more steel- and aluminum-consuming businesses (think construction, machinery and equipment manufacturing, auto manufacturing) than we do steel and aluminum producers, so the advantage created for the producers comes at a much greater cost to downstream users,” comments Erica York, a vice president at the Tax Foundation.
Analysts at the Economic Policy Institute argue that “tariffs cannot and should not be the centerpiece of a national economic strategy.” The inevitable trade war and currency exchange aberrations are particularly harmful to US manufacturers selling into overseas markets. Metals and minerals are among the upstream items exposing domestic manufacturers to a deterioration in efficient supply chains and an escalation of costs.
“Many US exports use imports as intermediate inputs to final goods produced in the United States,” the policy institute explains. “Making these inputs more expensive with tariffs will boost the price of these US exports and make them less competitive in global markets. Second, trading partners are highly likely to retaliate to US tariffs with tariffs of their own, making exports more expensive in international markets, which we’ve seen on ‘Made in America’ goods from Boeing airplanes to Kentucky bourbon.”
US automakers are already complaining that the tariff threats are causing chaos, higher cost projections and an inability to have confidence in business plans (see separate story).
With reciprocal tariffs likely to make US exports less competitive, overseas customers already “are shifting their supply chains away from US producers,” Cammu argues. The lost business often does not come back.
“Small and medium-sized businesses are particularly vulnerable, losing contracts to overseas rivals with unrestricted access to these essential inputs,” Cammu adds. “Downstream suppliers often cannot choose where they receive their steel and aluminum inputs.”
Not all US-based steel consumers agree with the premise. Some have specific situations in which Trump’s tariff policies are expected to be beneficial. One is Lowell Iron & Steel in Massachusetts, a 146-year-old fabricator of steel structures.
“The tariffs, thank God they’re coming,” Lowell president Dennis Scanell proclaims in a pro-tariff document released by the White House this week. “Maybe this evens the playing field for us. … There’s no way we can compete with Canada.”
Singlehandedly, the tariff strategy has the potential to cancel out multiple other policies from the new president that had been viewed as positive.
“This trade war threatens manufacturing jobs that have benefited from other pro-manufacturing policies enacted by the Trump administration,” Cammu argues. “Expansion plans will stall, and companies will face tough decisions regarding technology investments, workforce retention and long-term growth.”
Dom Yanchunas USA
