Tariffs aren’t likely to raise prices
Producers of steel goods, not consumers, will bear the brunt of increases, analysts say.
Consumers are unlikely to see big price increases on six-packs of beer or new cars as a result of the Trump administration’s decision Thursday to enact tariffs on imported steel and aluminum from certain countries, analysts said.
Part of the reason is the manufacturing process of goods — as raw materials move “downstream” and are processed into finished products, dramatic cost increases of the original materials begin to get filtered out of the final product price.
Also, competition in some consumer markets is such that companies will be forced to absorb the cost increases.
But another factor is timing — there’s a bit of a lag between the increased price of metals and when manufacturers and producers of goods will actually pay for new steel and aluminum.
The price of the aluminum and steel that companies buy to turn into aircraft, cars, beer cans and other products has already increased since mid-February, when the Commerce Department urged President Trump to consider tariffs on the imported metals.
In January, the price of U.S. Midwest ingot premium — which reflects changes in local market conditions as well as insurance and transportation costs for primary aluminum in North America — was 10 cents a pound. By mid-March, when Trump announced that a 10% tariff would be levied on aluminum imports, that price had jumped to 20 cents a pound.
On steel, the Midwest price for hot-rolled coil — a common steel product that is used in furniture, car bodies and appliances — was $661 per short ton, or 2,000 pounds. By mid-March, that price was $836.
But those cost increases have not yet traveled completely downstream.
“We believe the tariff is already priced into the current
President Trump wanted more U.S. solar manufacturing — and now he’s getting it.
Hanwha Q Cells Korea on Wednesday said it would build a factory in Georgia. JinkoSolar Holding Co. of China is planning one in Florida. And U.S. companies SunPower Corp. and First Solar Inc. say they’ll boost production in Oregon and Ohio.
The expansion underscores how immediate the reaction has been to the tariffs Trump imposed on imported panels in January to spur domestic manufacturing.
The duties could increase production capacity in the United States by at least 3.4 gigawatts, compared with 1.8 gigawatts at the end of last year, and would add to even more capacity already planned, based on Bloomberg New Energy Finance data.
It remains to be seen whether these factories will create the jobs Trump is after, but analysts say his policies are having a clear effect.
“Absent the Trump tariffs, this wouldn’t be happening,” Jeff Osborne, an analyst at Cowen & Co., said in an interview.
The push for tariffs began in April 2017, when Suniva Inc., a bankrupt Georgiabased panel maker, filed a trade complaint arguing that it had been crippled by a flood of imports. Trump
responded in January, imposing duties of as much as 30%, saying they were necessary to protect American manufacturers and create jobs.
While the plants announced by Hanwha and others will boost U.S. production, they’re unlikely to employ armies of workers, analysts said. As panel prices have declined, solar factories have become increasingly automated.
“While the Trump administration will claim this as a win, America’s victory is modest,” said Hugh Bromley, a New York-based analyst at Bloomberg New Energy Finance. “The profits will flow offshore, and the highly automated production lines will bring few jobs.”
The White House didn’t respond to a request for comment.