LOS ANGELES, March 3 — President Donald Trump has proposed tariffs on aluminium and steel that he says will put the country first. But a broad swath of corporate America strongly disagrees, saying the levies will boost prices on everything from cars to beer and force companies to cut jobs.
While the policy would hit the auto and aerospace industries hardest, it would also have ramifications for a wide range of businesses — and products that Americans purchase daily. Beer, soft drinks, candy, canned soup and even pharmaceuticals rely on aluminium for packaging. Electronics, such as Apple Inc.’s iPhone, also use the metals.
That’s led companies such as Anheuser-Busch InBev NV, General Motors Co and Campbell Soup Co to weigh in on Trump’s proposal, which would slap tariffs of 25 per cent on imported steel and 10 per cent on aluminium for “a long period of time.”
Autos and aerospace
The auto and aerospace industries will likely be hit hardest by the tariffs because they use so much metal. Toyota Motor Corp. and Hyundai Motor Co said the administration’s proposal will hike the price of vehicles sold in America.
“Despite the fact that Ford buys the vast majority of its steel and aluminium for US production, this action could result in an increase in domestic commodity prices — harming the competitiveness of American manufacturers,” Christin Baker, a spokeswoman for Ford Motor Co, said in an email.
Honda Motor Co said it “extensively” purchases steel and aluminium from US suppliers, but warned the plan still carries risks.
“Imprudent tariffs imposed on imported steel and aluminium would raise prices on both domestic and imported products, thus causing an unnecessary financial burden on our customers,” the Japanese automaker said in an emailed statement.
Sellers of consumer packaged goods may not use the same quantity of metals, but the levies would still have a big impact, according to industry leaders.
Campbell Soup warned that the taxes would raise price tags on items shoppers depend on: tin-plate steel cans. “Any new broad based tariffs on imported tin-plate steel — an insufficient amount of which is produced in the US — will result in higher prices on one of the safest and more affordable parts of the food supply,” spokeswoman Nicky Thomson said in an email.
Commerce Secretary Wilbur Ross attempted to tamp down that idea on Friday. During an appearance on CNBC, he held up cans of soup and soda, saying that the increases would only amount to fractions of a penny.
Even so, beer companies — another key user of aluminium — urged the Trump Administration to quash the proposal. There simply isn’t enough domestic supply to provide for the needs of US companies, MillerCoors said.
Demand for tin-plate steel was 2.1 million tonnes in 2016, while domestic supply was only 1.2 million tonnes, according to the Can Manufacturers Institute.
Frank Coleman, spokesman for the Distilled Spirits Council of the US, declined to weigh in on Trump’s proposal, calling it “premature to comment on any potential retaliation by our trading partners” until full details are released.
In opposing the tariff idea, AB InBev Chief Financial Officer Felipe Dutra warned that the US beer industry’s 2 million jobs could be hit by a sudden shortfall.
The widespread impact of Trump’s tariffs has created enemies of the policy even within the Republican Party. Representative Charlie Dent of Pennsylvania voiced particular concern for Hershey Co, which uses aluminium for packaging sweets such as its Kisses chocolates.
“We are watching this matter closely,” Hershey spokesman Jeff Beckman said in an email. “Such a broad and sweeping order could have a negative impact on the entire US economy.”
Depending on how a tariff is imposed, it could also hit iPhones, laptops and other tech products.
Many of Apple’s gadgets are made in China, including phones with aluminium or steel edges. If the levies only apply to raw materials, the effect on Apple would be minute, since the company produces only a small portion of its Macs in the US, according to Loup Ventures analyst Gene Munster.
If the tariff includes finished goods, Apple’s Mac and iPhone costs could go up by as much as 0.2 per cent, Munster said. Apple declined to comment.
Manufacturing and agriculture
Other industries are worried about retaliation. Production of wheat and other crops could be hurt if trade partners choose to punish US exporters.
“We’ve repeatedly warned that the risks of retaliation and the precedent set by this kind of protectionism may have serious potential consequences, not just for wheat, but for American agriculture,” said Steve Mercer, a spokesman at trade group US Wheat Associates in Arlington, Virginia.
The solar-power market also may feel the pinch. For developers of solar-panel farms, steel is used for poles and racking. A 25 per cent tariff could add as much as 2 cents per watt to construction costs, according to Dan Whitten, a spokesman for the Solar Energy Industries Association. That’s on top of tariffs Trump slapped on imported panels in January.
Electrolux AB, a Swedish appliance maker, had been planning to invest US$250 million (RM982.5 million) to upgrade a factory in Springfield, Tennessee. But that’s on hold until the company knows more about the tariffs, according to spokesman Daniel Frykholm.
“We need more information and to analyse further what the effects of this decision will be before we can decide whether to move ahead with the investment,” he said.
While coal may see a boost from increased domestic steel production, other parts of the energy industry would suffer. The Association of Oil Pipe Lines estimates that the steel levy would add US$76 million to the cost of building a typical pipeline.
“The US oil and natural gas industry, in particular, relies on specialty steel for many of its projects that most US steelmakers don’t supply,” said Jack Gerard, head of the American Petroleum Institute.
Of course, not everyone hates the tariff. US steel and aluminum manufacturers see it as a way to reinvigorate domestic production.
John Ferriola, chief executive officer of Nucor Corp., says the steelmaker expects to step up its investments in light of the tariffs. The changes should help the industry get back up to using 85 per cent of capacity, he said in a Bloomberg Television interview this week.
Last week, Century Aluminum Co CEO Mike Bless said that a mix of tariffs and quotas would allow the company to bring back 350 jobs and 150,000 metric tonnes of annual production.
And demand for metallurgical coal — used in steelmaking — may see a double-digit percentage increase if Trump’s tariffs succeed in boosting US steel output to at least 80 per cent of capacity, said Clarksons Platou Securities analyst Jeremy Sussman.
Still, not all metals companies are on board with Trump’s approach. Alcoa Corp. said last week that the best way to address the issue is via the World Trade Organisation.
“We believe vital trading partners, including Canada, should be exempt from any tariff on aluminium,” Alcoa said. “The aluminium industry has an integrated supply chain and actions should not penalise those that abide by the rules.” — Bloomberg
Source: The Malay Mail Online