March 9, 2018
Since President Donald Trump announced he was going to implement tariffs of 25 percent on steel imports and 10 percent on aluminum imports, the plan was opposed by numerous U.S. industries concerned for their businesses; widely criticized by congressional leaders in both political parties, fearing their effects on the U.S. economy; and derided by global leaders, some of whom have promised tariffs of their own in retaliation.
Despite the rancor and opposition, President Trump on March 8 signed orders executing the substantial and far-reaching tariffs on steel and aluminum imports. “The actions we are taking today are not a matter of choice, they are a matter of necessity for our security,” Trump said when authorizing the tariffs.
The two separate orders signed, for the steel tariff and aluminum tariff, go into effect March 23, 2018, and affect all countries except Canada and Mexico. “I have determined that the necessary and appropriate means to address the threat to the national security posed by imports of [aluminum/steel] articles from Canada and Mexico is to continue ongoing discussions with these countries and to exempt [aluminum/steel] articles imports from these countries from the tariff, at least at this time,” Trump wrote in the separate proclamations.
President Trump also states in the orders that “should the United States and any such country arrive at a satisfactory alternative means to address the threat to the national security such that I determine that imports from that country no longer threaten to impair the national security, I may remove or modify the restriction.”
A Bloomberg Government report cited by the Motor and Equipment Manufacturers Association (MEMA) states White House officials as saying the tariffs won’t cause significant downstream price effects or significant adverse effects on jobs. Some industry associations are refuting those assumptions.
MEMA, which represents more than 1,000 companies that manufacturer motor vehicle parts and components in the U.S., has been vocal early and often about opposition to the tariffs, including a letter written to President Trump Feb. 13, on the consequences of the tariffs.
In response to the signing of the orders this week, the association labeled President Trump’s actions as “dangerous” and could hurt U.S. jobs and market competitiveness. “Our position on tariffs is clear: Tariffs will be detrimental to the jobs that the motor vehicle parts supplier industry created. While we support the administration’s focus on strong domestic steel and aluminum markets, tariffs will limit access to necessary specialty products, raise the cost of motor vehicles to consumers and impair the industry’s ability to successfully compete globally,” MEMA states.
The association adds the exclusion of Canada and Mexico might “mitigate negative effects in the short term, tariffs on steel and aluminum would hurt the largest sector of manufacturing jobs in the U.S., putting the well-being of many Americans – and the nation’s economic security – at risk.”
The Association of Equipment Manufacturers (AEM) also issued a statement that it’s “profoundly disappointed” by President Trump’s decision to move forward with the tariffs.
The tariffs “will put U.S. equipment manufacturers at a competitive disadvantage, risk undoing the strides our economy has made due to tax reform and ultimately pose a threat to American workers’ jobs,” says Dennis Slater, AEM president.
“Steel accounts for roughly 10 percent of equipment manufacturers’ direct costs. The price of steel has already risen in anticipation of the administration’s actions, and a 25 percent tariff will only further erode the progress our industry has made over the past year,” Slater adds.
OEMs have weighed in on the president’s actions, too.
“All we can say at this point is that the tariffs will obviously impact the cost of commodities we use to build our products, making them more expensive to produce and purchase,” says Susan Alt, Volvo Group North America senior vice president of public affairs.
“Navistar supports policies and regulations that create open markets to allow U.S. products to compete globally. We’ve reviewed the executive order and we appreciate that NAFTA countries are exempt,” says Lyndi McMillan, senior manager, external communications.
“As for the tariffs, we believe any impact on Navistar will be minimal in 2018 and manageable within our guidance for the year. We believe this because more than 90 percent of the steel purchased by Navistar is sourced within NAFTA and 100 percent of our aluminum is sourced within the United States,” McMillan says. “Additionally, we’ve staggered our steel and aluminum contracts, and have also done some hedging. Finally, we had already anticipated higher commodity prices for 2018 and planned a number of procurement cost reduction actions to offset them.”
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