Impact Of Steel Tariffs Taking Hold On Industrial Suppliers

Many industrial suppliers and distributors are already feeling the effects of the steel tariffs the Trump administration enacted on June 1. For those now paying significantly more for raw materials and products than they were a year ago, how long can they wait before having to pass at least some of those costs down to their customers?

Id 35193 Steel Tariff

After a lot of talk, the tariffs are here and in effect.

Starting June 1, the U.S. enacted a 25 percent tariff on imports of steel, and a 10 percent tariff on aluminum from the European Union, Canada and Mexico. Expectedly, this resulted in retaliation from those areas. Canada imposed matching tariffs against the U.S. as of July 1; China has accused the U.S. of starting a trade war and likewise started $34 billion worth of tariffs to equal that the U.S. levied; India plans to recoup penalties of $241 million on $1.2 billion worth of steel and aluminum exported to the U.S.; and other countries are concerned about impacts of the U.S. tariffs as well.

While time will tell if the U.S. tariffs will have the economic effect the Trump administration desires, plenty of analysis has already poured in. Notably, a Reuters survey of 60 economists that showed 80 percent believe the steel and aluminum tariffs will be a net harm to the U.S. economy, with the remaining 20 percent saying the tariffs will have little to no effect.

On a more granular level, it appears the tariffs certainly will have an impact on industrial suppliers and distributors of metal products. On Monday, I visited a company in Michigan that is a fastener distributor and provider of vendor managed inventory products and systems. I was compelled to ask if they are expecting to be affected by the tariffs, and an executive immediately responded that the company has already felt such an impact. He said one of the companies main suppliers raised their prices within days after the tariffs went into effect. He said the company will try and weather those higher costs for the foreseeable future instead of passing them down to customers by raising prices themselves.

Since my interview there, I keep wondering, how many other distributors and suppliers can afford to weather the storm? How many others have already raised prices?

A number of news reports have included commentary about this topic from industrial metal parts suppliers, many of which already seeing grim results from the tariffs. At the largest nail manufacturer in the U.S., Mid-Continental, it laid of 60 of its 500 workers at its Poplar Bluff, MO plant due to increased steel costs. The company said orders for nails sunk 50 percent after the company raised its own prices to deal with those higher costs.

At automotive parts maker Stripmatic Products, the company says it is now paying almost 50 percent more for imported steel than it was a year ago, a cost that will impact the company's profits and profit sharing, employee pay raises and investments in new equipment. See Stripmatic owner Bill Adler's interview with News 5 Cleveland below:

On the flip side, the owner of precision metal parts supplier Atlas Tool Works says the tariffs are helping his business and others in similar businesses as the tariffs encourage customers to keep their supply chain domestic instead of offshoring. See Atlas Tool Works owner Zach Mottl's recent interview with Fox Business below:

So, what do you think? Are the steel and aluminum tariffs a good thing for your business, or might they be down the road? Will things get worse before they get better?

If you want to share how your company has been impacted or just your general thoughts on this topic, feel free to comment below, or shoot me an email at mike.hockett@advantagemedia.com. When the calendar turns to September, I'll be back on the trade show circuit. And when I'm at the various industrial manufacturing expos, I'll certainly be looking to ask suppliers and distributors what tariff impacts their business is experiencing.

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