Local Update: Steel Tariff Decisions

Potential tariffs on steel and aluminum imported to the US have been in the news this winter and spring. What are the facts, and what do they mean for consumers?

In addition to producing steel and aluminum here at home, the US annually imports a significant amount of each metal from a variety of countries. Between 2011 and 2013, steel imports in particular surged by more than 12%. Added together, the imports and domestic production have accounted for more than US market demand, hampering the domestic steel industry’s recovery from the Great Recession of 2008-2009 by keeping prices depressed.

While the domestic steel industry has struggled with excess capacity, wholesalers and consumers have largely—if indirectly—benefitted, as prices have remained low. In the residential space, this has meant lower wholesale and manufacturing costs on the metal that becomes home appliance products, including HVAC equipment.

This trend, however, could potentially reverse as a result of proposed tariffs on steel and aluminum imports.

The presidential administration has been meeting with steel and aluminum executives and lawmakers to discuss global supply and demand and the effect on the US industry and prices. In February, Commerce Secretary Wilbur Ross issued three recommendations for the administration’s consideration:

  • #1: A global 24% tariff on all imported steel from all countries. This tariff would likely result in double-digit price increases for the residential prefabricated sheet metal industry.
  • #2: A tariff of at least 53% on select steel imports from 12 countries. These countries include Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey, and Vietnam—the majority of countries currently supplying foreign steel to the residential sheet metal industry.
  • #3: A quota on all steel products from all countries, equal to 63% of each country’s 2017 exports to the US. This quota would place enormous immediate pressure on domestic producers to meet current demand. The effect could result in delays in the supply chain, ultimately delaying product manufacture and availability in the residential industry.

It is anticipated that the presidential administration will make a decision by mid-April on a final course of action. Any of the tariff or quota recommendations has the potential to, at the macro level, protect the US industry from foreign competition. Yet, consumers will likely see prices on all products produced with steel and aluminum increase.

HVAC equipment manufacturers will likely have to pay more for the steel and aluminum used in manufacturing their products. Of course, that means that companies operating in both the commercial and residential space—including Allied Air Conditioning and Heating—will feel the effects of the decision.

At Allied, we intend to closely monitor tariff and quota developments and the ramifications of political decisions on the industry. In addition, we will maintain close relationships with our equipment suppliers to ensure availability of the products our customers need. As the administration makes its decision and we have clarity on the local impact of that decision, we will be in touch with our customers on current and planned projects regarding potential price increases.

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