Countries vow counter-tariffs
premium number,” said Doug Hilderhoff, head of North American aluminum analysis at CRU. “The premium metal would have been about the same level as now without the news today.”
The tariffs — 25% on steel and 10% on aluminum — will affect imports from the European Union, Mexico and Canada. Mexico and Canada vowed Thursday to levy counter-tariffs; the EU said it had drawn up a list of U.S. products worth several billion dollars that would be subject to tariffs.
So, though some companies have responded to higher prices as predicted by the Trump administration — by ramping up U.S. domestic production, such as a near-doubling of planned solar panel capacity — that could get swamped by the damage of a trade war.
“A trade war makes everyone worse off,” said Larry Harris, professor of finance at the USC Marshall School of Business. “Higher tariffs will discourage foreign consumption of our exports and that will hurt employment in the United States and lower the prices we receive for our exported goods and services.”
Manufacturers and producers of steel goods will probably pay higher prices for metals in July, said Josh Spoores, principal analyst of steel at CRU. Based on that timeline, consumers could see price increases in steel goods next year, he said.
But manufacturers are expected to bear the brunt of the price increases, while the effect on consumers will be minimal, analysts said.
Some manufacturers may choose to divert the increased funding they gained from the Trump administration’s business tax cut to their higher materials costs, rather than investing in new programs or products, as originally intended.
That’s the case with several breweries across the country, said Jim McGreevy, chief executive of the Beer Institute, a national trade
association for the beer industry. He said one small brewer located on the East Coast has put more than 50% of its excise tax savings toward covering the increased cost of aluminum.
Last year, U.S. beer brewers purchased 36 billion aluminum cans and bottles, McGreevy said. The Beer Institute estimated that the tariffs on imported aluminum and steel will cost brewers about $347 million a year.
“This is a big cost to brewers,” McGreevy said.
Last month, Campbell Soup Co. estimated that its margins would fall in fiscal year 2019 “in part due to the anticipated impact of import tariffs.”
In an earnings call with analysts, Chief Financial Officer Anthony DiSilvestro
said Campbell expected double-digit cost increases on steel and aluminum, “all of it driven by the impact of anticipated tariffs.”
The Alliance of Automobile Manufacturers said in a statement that it expected the tariffs on steel and aluminum to result in price increases for domestic metals, “threatening the industry’s global competitiveness.”
Many manufacturers may be loath to pass that cost on to consumers. They could lose market share if competitors do not go along with the price increase, said John Mothersole, director of research in IHS Markit’s pricing and purchasing service. And depending on the production process, raw materials might represent a relatively small portion of overall costs.
“You get a normal dampening down as you move through the supply chain,” Mothersole said.
He estimated that the tariffs on aluminum will add an additional 1 to 2 cents to the cost of canned beer. Price increases for a biggerticket item, such as a $33,000 car, could be about $144.
“It’s measurable,” Mothersole said of the tariffs’ effect on consumer pricing. “But it’s relatively minor.”
But a tariff on imported cars — currently the center of an investigation initiated by Trump last month — could play out differently. Every major automaker imports at least some of the vehicles delivered to U.S. consumers, and more than 30 brands will source a majority of the models they sell this year from overseas assembly plants, according to Bloomberg.
One Delaware BMW dealer estimated that a 25% tariff could push a 330i vehicle from its starting price of about $45,000 toward sticker prices of $60,000, which would make some buyers think twice about buying the car.