As the U.S. prepares to implement tariffs on steel and aluminum, manufacturers across the country are already feeling the impact, with prices for these essential materials surging and supply chains experiencing disruptions.
Key Highlights:
Price Increases:
Glen Calder, who operates a machinery factory in South Carolina, reports that steel prices have jumped over 15% in just two weeks.
Brian Nelson, running a factory in Illinois, struggles to obtain price quotes from suppliers due to uncertainty surrounding upcoming tariffs.
Tariff Implementation:
President Donald Trump’s 25% tariffs on steel and aluminum are set to take effect on March 12, creating a ripple effect throughout the manufacturing sector.
While the intention behind the tariffs is to support domestic manufacturers, they are leading to higher costs for producers who rely on these metals for their products.
Market Response:
Steel prices in the U.S. have surged, with hot rolled coil prices in the Midwest rising 12% to $839 per short ton over two weeks, and increasing 20% since Trump took office.
In contrast, steel prices in northern Europe have only increased by 6%, and prices in eastern China have remained stable.
Executive Concerns:
A survey by Bain & Co. revealed that 40% of chief operating officers anticipate double-digit increases in input costs due to tariffs, with 80% considering revisions to financial forecasts.
Leon Topalian, CEO of Nucor, praised the tariffs as a positive step for U.S. steelmakers, leading to price increases for hot rolled coil.
Supply Chain Disruptions:
Nelson describes his situation as being “the middle guy in the sandwich,” facing pressure from both steel producers and large farm equipment manufacturers like Deere and AGCO.
With mills canceling orders and increasing lead times, panic buying among customers has exacerbated the situation, pushing lead times further out.
Broader Economic Impact:
A survey from S&P Global showed an increase in the prices paid by businesses for inputs, attributed largely to tariffs and supplier price hikes.
The White House maintains that tariffs are part of a broader economic agenda aimed at supporting domestic producers and enhancing competitiveness.
Challenges for Manufacturers:
Calder, whose company produces paving machines, is reluctant to raise prices amid soft demand and elevated interest rates.
The tariffs on steel are compounded by additional tariffs on heavy-duty engines sourced from China, further impacting costs.
Historical Context:
Manufacturers recall the previous round of tariffs imposed in 2018, which also led to price increases and supply chain challenges.
A.H. “Chip” McElroy II, CEO of McElroy Manufacturing, notes that domestic suppliers often raise prices in response to tariffs, even if the increase is not directly proportional.