Well this is ironic. By imposing tariffs to help domestic steel and aluminum manufacturers, President Donald Trump is hurting other industries that assemble products in the U.S.
Last week, the Trump Administration announced that tariff exemptions on steel and aluminum imports from Canada, Mexico, and the European Union will be allowed to expire, meaning those 30 countries will face additional tariffs of 25 percent on steel imports and 10 percent on aluminum imports.
This announcement is different from news earlier this year, when Trump signed proclamations imposing those tariffs on imports from all countries except Mexico and Canada—the latter accounting for 16 percent of steel imports.
Outdoor companies—such as Mountain Safety Research (MSR)—that manufacture products in the U.S. using raw steel and aluminum imported from those countries could be significantly impacted by the additional tariffs.
“While these tariffs are intended to create a competitive advantage for U.S. steel and aluminum producers, we expect that they will create an unintentional, competitive disadvantage for businesses like MSR that manufacture consumer products in the USA,” said Doug Sanders, vice president of MSR.
“Many of the products that MSR competes against are produced outside the USA,” Sanders said. “Since these tariffs only apply to raw materials, imported finished goods made elsewhere will actually benefit from these tariffs.”
Why the tariffs?
Trump’s action follows a year-long investigation by the Department of Commerce, which found that certain imports of steel and aluminum posed a threat to U.S. national security.
“The Secretary found that the present quantities of steel articles imports and the circumstances of global excess capacity for producing steel are ‘weakening our internal economy,’ resulting in the persistent threat of further closures of domestic steel production facilities and the ‘shrinking [of our] ability to meet national security production requirements in a national emergency,'” Trump wrote in the order.
Sanders said that an overseas manufacturer can turn steel and aluminum into a finished good and avoid the tariff. Meanwhile, manufacturers in the U.S. using raw aluminum and steel will experience increased material costs, even if they are using raw U.S.-made materials, building in the U.S., and employing U.S. workers.
“Fortunately, MSR’s Seattle factory already sources domestic raw materials for a number of our products, such as snowshoes,” Sanders said. “For this reason, we actually expect the short-term impact to be relatively low. However, it’s very likely that the cost of domestic raw materials will increase as demand for those products rises long-term.”
Higher prices expected
Products imported into the U.S. whole, such as LEKI ski poles, are not impacted.
Greg Wozer, vice president of LEKI USA, said the company’s customs broker has been keeping tabs on the issue and that the new order does not impact LEKI since products are made in and imported from the Czech Republic.
“We’re being told that this applies to raw materials and not finished goods,” Wozer said. “The harmonizing codes that we operate under are not going to be affected.”
Rich Harper, Outdoor Industry Association’s manager of international trade, said the association is concerned about the potential impact to outdoor companies that source steel and aluminum from Canada, Mexico, and the European Union.
“The tariffs could significantly raise costs for products like trekking and ski poles, tent frames, carabineers, crampons, stoves and other products made in the United States by outdoor companies that source steel or aluminum from Canada, Mexico and the European Union and lead to retaliatory measures against U.S. products,” wrote Harper in a news release last week. “Canada, Mexico, and the European Union have already announced that they will impose retaliatory tariffs on billions of dollars worth of U.S. imports. The Canadian list includes U.S. sleeping bags that will be subject to a 10-percent tariff and the preliminary European Union list includes certain footwear products.”
The EU, Canada, Mexico, and other U.S. allies and trade partners targeted by the new tariffs are seeking remedies through the World Trade Organization and the North American Free Trade Agreement, according to multiple news reports.
Companies like MSR are going to do what they can to keep prices low.
“Regardless of the tariff’s impact on MSR, we will always work to minimize or eliminate the effect that increased material costs have on customer prices,” Sanders said.