Will Tariffs on Steel and Aluminum Result in Higher Prices?

Will Tariffs on Steel and Aluminum Result in Higher Prices?

In early March, President Trump announced he would invoke a legal provision that allows him to impose a 25 percent tariff on steel imports and a 10 percent tariff on imported aluminum. Since then, a series of changing policy decisions has led to uncertainty about if and when the proposed tariffs will be implemented, and how they might impact the U.S. and countries around the world.

The Purpose Behind Trade Tariffs

A tariff is a tax or duty that the government places on a class of imported goods which makes the foreign products more expensive. The goal is to give a boost to domestic makers of the product that do not have to pay the tax. In this case, the hope is that as steel and aluminum from other countries become more expensive, businesses will turn to American steel and aluminum makers to fill demand. This would offer support for domestic industries that have been struggling for years as well as address the issue of dumping, where a country sends cheap, excess product into the global market. China is considered a major perpetrator of dumping steel.

The Trump administration has said that Canada and Mexico are exempt from the tariffs, and other countries may receive exemptions in the future. Currently, the focus has been on an escalating trade conflict with China, which has announced its own tariff plans. The assumption is that negotiations between the U.S. and China will happen at some point, but there is no telling if tariffs will be imposed before this happens.

What Changes Can Be Expected?

Imposing the steel and aluminum tariffs can trigger any number of changes. Both metals are crucial raw material for automobiles, airplanes and appliances made in the U.S, and the construction, oil and utility industries use them for beams, pipelines and wires, as well as cans for food and beverages.

Imports make up about one third of the steel and more than 60% of the aluminum used by American businesses every year. While it's not clear how much imports will fall if the administration follows through with the tariffs, domestic steel and aluminum manufacturers would certainly stand to benefit. However, there is considerable debate over whether American steel mills and aluminum smelters can increase production enough to match the overseas supply that would be lost.

Failure to meet all domestic demand would mean that U.S. companies would still need to buy the more expensive imported steel and aluminum, and they could be forced to raise consumer prices for products ranging from cars and appliances to beer and soda. Rising prices for raw materials could also have a negative impact on other sectors of American manufacturing, and there are fears that the tariffs could weaken the entire global economy.

Protecting Customers from Price Hikes

At Traffic Safety Direct, we are monitoring this situation closely as it has the potential to impact a variety of our core product lines. Corrosion-resistant steel is used for essentials like our wide selection of u-channel, round and square sign posts. Most of our traffic, construction and parking signs – including standardcustom and handicapped signs – are made of 0.80 aluminum.

It may take some time before we know for certain if these tariffs will go into effect, and this makes it difficult to plan ahead. However, we are doing what we can to protect our customers by stocking up on our most popular steel and aluminum products. This will allow us to continue to offer the lowest prices possible for the longest period of time.
However, keep in mind that as the fear of higher prices for steel and aluminum products grows, the demand for these products skyrockets as consumers rush to beat the increases. This can result in longer lead times and shortages of the most popular products.
Our advice: if you anticipate needing a specific product in the future, do not wait until the last minute to order it. For example, if your construction project requires 25 signs for a start date of July 1st, order at least four weeks ahead of time to avoid the risk of a delay to your project. Contact Traffic Safety Direct anytime with questions or concerns about pricing and availability.

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