Uncertainty looms large over American manufacturing sector after Trump’s tariffs

American manufacturers across multiple sectors use both foreign and domestic steel and aluminum in their production processes. According to US Geological Survey, in 2017, imports made up 61 per cent of aluminium consumption in the U.S. and total crude and semi-finished aluminium import stood at 6.3 million tonnes.

The tariffs are creating worries among the US automakers, can makers and construction industries and construction material suppliers.

US automakers buy much of their raw steel and aluminium domestically, but they import some of the auto components from other countries. Duties have created a great deal of supply chain uncertainty for automotive-sector companies. The Bureau of Industry and Security (BIS) has announced procedures whereby U.S. consumers of steel and aluminium can seek exemptions on condition.  The permitted conditions could be:

1. Steel and aluminium products are not available domestically;
2. Domestic production is insufficient to satisfy domestic consumption
3. Specific national security needs otherwise require an exemption.

Beer manufacturers and can suppliers rely on imported thin aluminium can sheet to make cans for their products. Tariffs would make those imported materials more expensive forcing manufacturers to lay off workers or move their facilities to Canada or Mexico or pass on the extra cost to the end-consumers increasing the price.

The tariffs may also affect end users industries like construction that buy products from manufacturers. Price uncertainties about aluminium building materials already affected deal negotiations and planning processes for real estate projects. Contractors and real estate investors may choose to pass the costs to the future buyers and tenants. This would give property owners of existing buildings a chance to raise their rents as well.

Pipeline, oil, and gas companies have protested against the tariffs because there just isn’t enough domestic steel supply for manufacturing their products. U.S pipelines are currently made with only about 30 per cent domestic steel components and requiring pipelines to be made entirely of US steel would make their production expensive to American companies.

U.S. steel and aluminium makers can see a short-term boon in production with the help of these tariffs. However, there are structural limits to the increase. Domestic steel and aluminium plants may not be able to easily or cheaply convert their facilities to produce all the components that have been imported till date. They are currently not in a position to meet the demand for imported products.

All countries except Canada and Mexico are subject to the tariff, however, the European Union, South Korea, Argentina, Australia, and Brazil have been granted temporary exemptions as a relief to the domestic manufacturers.  Still the tariffs would continue to create uncertainty among the investors and manufacturers till the time a permanent solution is achieved.