From Bulldozers to Beer, Tariffs Could Ripple Through U.S. Economy

Date: March 5, 2018

Editors Note: The Motor & Equipment Manufacturers Association (MEMA), which represents more than 1,000 companies that manufacturer motor vehicle parts and components in the United States, strongly opposes tariffs on steel and aluminum announced on March 1 by the Trump administration.
 
MEMA President and CEO Steve Handschuh “Many specialty materials and components imported by motor vehicle suppliers are used by hundreds of vehicle parts manufacturers. Suppliers’ access to these specialized products is critical to the industry and our national economy,” Handschuh said in a 
letter to President Donald J. Trump. “MEMA member companies operate in an integrated global supply chain with both suppliers and customers inside and outside of the United States. This model has allowed for continued growth in motor vehicle production as well as U.S. employment in our sector… Disruptions to supply chains or increases in production costs will not contribute to the national security of the United States.”

HDMA and MEMA ask all members to engage their own elected officials and express your company’s position on this important issue. Please visit the MEMA website for a link to our member service, which makes a convenient association with your congressional district and state representation. It is critical that the elected officials hear from you directly on this matter. If you have a personal relationship with your elected officials, please call them directly, or send a personal e-mail on your position on this measure. Please contact our DC office or HDMA directly for further information or questions. www.mema.orgwww.hdma.org

 

Wall Street Journal

President Donald Trump’s plan to impose steep tariffs on steel and aluminum imports drew sharp criticism Thursday from industries that fear it could raise their costs to make everything from airplanes to beer cans.

The bigger worry, some manufacturers and agricultural groups said, is the potential for retaliatory measures by other countries that could imperil U.S. exports and jobs.

Mr. Trump said his plan to impose tariffs of 25% on imported steel and 10% on imported aluminum is needed to address what he described as a trade imbalance benefiting other countries. Companies that make steel and aluminum in the U.S. have in recent years lobbied for the tariffs, which they say are needed to compete with foreign competitors making metal at lower prices.

“We appreciate the President’s commitment to strengthening the U.S. aluminum industry,” the Aluminum Association trade group said Thursday. It wasn’t immediately clear what types of aluminum and steel would be subject to new tariffs.

The impact on metals-consuming industries will also hinge on whether the administration grants exemptions to some exporting nations.

Some industries are already lining up for those exemptions. The Beer Institute, a trade group, called for “cansheet” aluminum to be excluded from any new trade barriers. “Imported aluminum used to make beer cans is not a threat to national security,” said Jim McGreevy, the group’s president.

Mr. Trump invoked national-security concerns as a reason behind the administration’s push for tariffs. Studies conducted by the Commerce Department, made public last month, concluded metals imports had eroded the country’s ability to make its own weapons, tanks and aircraft as well as other critical infrastructure.

Manufacturers in the defense industry relies on imports for only a fraction of their steel and aluminum needs, and the Defense Department said last week it wasn’t concerned about the effect of tariffs on the industrial base for military equipment.

But Remy Nathan, vice president for international affairs at the Aerospace Industries Association, said higher costs and retaliatory measures could disrupt global supply chains and hit exports, denting the aerospace and defense industries’ $86 billion trade surplus last year. The group represents companies including Boeing Co. BA -3.84% and Lockheed Martin Corp. . “It’s the indirect industrial impact we are most concerned about,” said Mr. Nathan.

Manufacturers and trade groups for some of the country’s biggest metals’ consumers expressed opposition to the planned tariffs, saying the trade barriers would increase their costs—expenses that may be passed along to consumers.

“It’s going to be expensive,” said  Ed Bolas, chief financial officer at DyCast Specialties Corp., a maker of parts for products including cutting tools and engines. “All of it will impact the consumer.”

The Association of Equipment Manufacturers, which represents heavy machinery giants Caterpillar, Inc. and Deere & Co., said new trade barriers will hurt American exports. Caterpillar executives have said tariffs could drive up prices for domestic steel and make it costlier for it to produce mining trucks, bulldozers and other equipment.

Steel is the largest input cost for big machinery producers, accounting for around 65% of raw material expenses at Caterpillar, with aluminum adding another 10%, according to JPMorgan analyst Ann Duignan. She estimates agricultural equipment makers such as Deere are even more exposed to raw material inflation, unless they can claw back costs through higher sale prices.

Polaris Industries Inc., PII -1.39% which buys more than $300 million in steel and aluminum each year to make off-road vehicles, snowmobiles and motorcycles, doesn’t expect tariffs to significantly increase its costs, Chief Executive Scott Wine said Thursday.

But Mr. Wine said he was concerned that duties or retaliatory trade barriers would lead other manufacturers or agricultural companies to lay off workers that buy his company’s products. “President Trump has been a phenomenal supporter of jobs in the U.S., and this would not be in line with his previous efforts,” he said.

A lack of clarity on how or whether the Trump administration would impose tariffs has been frustrating, said Mr. Bolas, of DyCast Specialties. The Starbuck, Minn.-based company has put off a 5% raise for its 58 employees this year because of the uncertainty over how tariffs would affect its costs, he said.

Some auto makers and parts suppliers reacted to Thursday’s announcement with alarm.

The Motor Equipment Manufacturers Association, the chief automotive components supplier trade group, said the new tariffs would endanger jobs and raise costs.

A lobby representing foreign auto and parts makers in the U.S., the Association of Global Automakers, also criticized the move and linked it to a broader White House agenda of “risky renegotiations” for NAFTA and other trade deals.

A core member of that association, Toyota Motor Corp. TM -1.17% , issued an unusually blunt statement condemning the White House move. “The Administration’s decision to impose substantial steel and aluminum tariffs will adversely impact automakers, the automotive supplier community and consumers,” the Japanese auto maker said.

Not all car makers signaled immediate opposition to the announcement. General Motors Co. GM -3.14% , which like Toyota’s local operations buys 90% of its steel from U.S. suppliers, said in a statement that it was reviewing the details but “support[s] trade policies that enable U.S. manufacturers to win and grow jobs in the U.S., and at the same time succeed in global markets.”

Meanwhile, farm groups feared Mr. Trump’s move would invite retaliation against U.S. crop exports, after China recently raised the prospect of tariffs on sorghum, a grain used in livestock feed.

“These [steel and aluminum] tariffs are very likely to accelerate a tit-for-tat approach on trade, putting U.S. agricultural exports in the crosshairs,” said  Brian Kuehl, executive director of Farmers for Free Trade, a Montana-based group set up to defend U.S. agricultural exports.

The farm group said a U.S.-Mexico dispute over trucking rules in the late 1990s led Mexico to place tariffs on U.S. apples, cheese and wine, while China placed a steep duty on chicken parts imported from the U.S. after tariffs in 2009 were placed onto Chinese tire imports.

“The agriculture sector knows from experience that our ag exports are the first to be hit by retaliation,” Mr. Kuehl said.

 

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