Apr 19, 2018

 

 

 

 

 

 

 

 

 

 

 

 

I am often asked, “How are the new tariffs Trump put on steel affecting your business?”

The short answer: It could send it to the moon.

From Fox Business:

“The tariffs are likely to keep driving up domestic metal prices, which have already been on the rise since the beginning of the fourth quarter of 2017. According to a report in Reuters, U.S. steel mills typically adjust prices once a year. In 2018, they’ve already adjusted the price four times.”

The article quoted one U.S. manufacturer whose cost of U.S. made steel jumped from 38 cents a pound to 68 cents a pound. They also were quoted saying the prices will be going up even higher.

In other words, when the tariffs hit, instead of using them to a competitive advantage, U.S. domestic steel mills are now price gouging. This is going to inflate the cost of products made in the U.S., which will make products made in China more attractive.

I never understood the logic of the steel tariffs, other than if a lobbyist from the U.S. steel industry was whispering in the right person’s ear in Washington and complaining that they can’t compete. Now that the tariffs are in place, someone tell me how they’re competing? If you wanted to make U.S. products more competitive it seems like the smart thing to do would be to find a way to lower U.S. production costs, not send them through the roof.

Raw material, labor, equipment, marketing, admin, government regulations, and taxes are all a part of the cost to produce a product, so why not take a hard look at what they can do to somehow reduce these costs? The increase in steel prices may more than offset the corporate tax cuts that were just enacted, so whatever good the corporate tax cuts might have done are blunted.

Unless I’m missing something (someone please tell me) I don’t see the move to hit imported steel and aluminum with tariffs as wise.

Photo credit: irochka