Higher costs are likely after new tariffs take effect

WITH no indication the Trump administration will reconsider its plan to impose large tariffs on imported steel and aluminum, Oklahoma consumers and industries should brace for the consequences — namely, higher prices and costs.

Citing national security interests, Trump announced the tariffs — 25 percent on steel, 10 percent on aluminum — earlier this month. They are to take effect Friday. The administration exempted Mexico and Canada, at least temporarily, which was good news for Oklahoma companies because the state does nearly $2 billion in export business with those countries.

Yet the tariffs will still leave a bruise.

Charles Hughes, policy analyst at the Manhattan Institute, wrote recently about the potential impact on the domestic energy industry by driving up the cost to build and maintain pipelines, which are vital in the transporting of oil and natural gas. About 77 percent of the steel used in line pipe is imported, according to the American Petroleum Institute, as is 40 percent of the steel used for high-pressure valves and 42 percent of the market value for finished steel pipeline fittings.

“Across different components of pipelines, project sponsors and operators rely on steel imports for a substantial share of materials needed to construct these pipelines,” Hughes writes.

Increasing the cost of steel will cause some energy companies to consider stopping or scaling back planned projects, adversely impacting workers. Those projects that go forward are sure to result in added costs to customers. Hughes noted one company planning a natural gas pipeline from West Texas to the Gulf Coast estimated the tariff would mean a 2 percent to 4 percent cost increase on customers.

If the administration doesn’t plan to reverse course, Hughes writes, it “should at least consider an exemption for pipelines, so that the tariffs do not sap strong growth in the domestic energy industry.”

Oklahoma consumers should hope Trump reconsiders, too. Commerce Secretary Wilbur Ross said recently the tariffs would have a minimal impact on prices, and used the cost of a can of soup as an example. But as Stifel Nicolaus chief economist Lindsay Piegza said Saturday on CNBC, the cost to make cans for soft drinks, soups, beer, etc., is expected to increase by two to six cents per unit. “If this is passed on directly to the consumer, it can easily sway them from making certain purchases on a daily or monthly basis,” Piegza said. “When you talk about this on annual basis, that’s hundreds of millions of dollars.”

U.S. Rep. Tom Cole, R-Moore, is among the many Republican members of Congress who are concerned about the tariffs’ impact. In his latest weekly column, Cole said he agrees with Trump that the United States is part of some bad trade deals that merit renegotiation. On the other hand, he said, the administration’s plan could hurt allies whose trade agreements don’t fit that description. He cited South Korea, which is in a delicate spot with North Korea, along with the United Kingdom and France, longtime partners in Europe.

“We must ensure that we target our actions carefully on countries and practices that violate current trade law,” Cole wrote. That doesn’t appear to be Trump’s plan, unfortunately.