Trump Tariffs Could Drive Up Project Costs

Trump Slaps Steel and Aluminum Tariffs on Closest Allies – Canada, Mexico and the European Union, setting the stage for potential trade wars and also higher domestic prices.

Steel and Aluminum Import Tariffs

  • President Trump on March 8 authorized the imposition of 25% tariffs on steel and 10% tariffs on aluminum imports.
  • NAFTA trading partners Canada and Mexico, and the European Union were initially given temporary exemptions from the tariffs.
  • The temporary exemptions are set to expire at midnight Friday, implying those closest allies will be included in the tariffs.
  • Canada, Mexico and the European Union account for roughly half of all US steel imports.

The US will impose tariffs on steel and aluminum imports from its closest neighbors and allies, Commerce Secretary Wilbur Ross said Thursday, raising concerns about retaliatory tariffs, spike in domestic prices, and slowing down of infrastructure projects.

Ross said the import tariffs – 25% on steel and 10% on aluminum, first announced in March – would include Canada, Mexico and the European Union. These trading partners were earlier given temporary exemptions which expire on midnight Friday. The tariffs are meant to make good on President Trump’s promises to protect American industry, but they’ve prompted a fierce response from allies and domestic businesses.

Brian Turmail

“The new tariffs will almost certainly lead to increased costs for new infrastructure projects,” said Brian Turmail, spokesman of the Associated General Contractors of America.  “That means federal, state and local officials will be able to build fewer projects for what it would have cost to build more without the tariffs.”

Administration officials have cited Section 232 – a rarely used national security law – as the basis of the tariffs. They are considering the same law to employ tariffs on imported automobiles.

“We have definitely seen the impacts from Section 232,” Turmail said. “Many of our member firms report the price they are paying for products like rebar has increased from between 15 and 20 percent during the past few months.  These price increases are particularly difficult for firms that are engaged in fixed price construction contracts where they are forced to absorb these cost increases.

“Moving forward it is safe to assume that contractors will factor the recent, and likely additional, increases in steel and aluminum prices into their bids, raising the cost of all manner of construction, including infrastructure.”

importing steel

Earlier, the US had delayed imposing the tariffs on Canada and Mexico pending talks on NAFTA and related national security issues, Ross said.

“Those talks are taking longer than we’d hoped. There is no longer a precise date when they may be concluded, so they were added into list of those who will bear tariffs,” he said.

Canada, Mexico and the EU account for almost half of US steel imports.

The trading partners have all warned a trade war if the tariffs are imposed. For instance, the EU is expected to impose retaliatory tariffs of about $3.3 billion on iconic American products such as bourbon, jeans and motorcycles.

However, many American businesses support the tariffs, saying these will shore up American economy, helping create new jobs and preserving national security.

“There is evidence the Section 232 strategy is working as the Trump administration moves ahead with its steel and aluminum trade actions,” said Alliance for American Manufacturing President Scott Paul.

“American smelters and steel mills are reopening, which means more jobs and added capacity. And more pressure is being applied by our allies to China on steel dumping and overcapacity.”

Scott Paul

“Looking ahead, the product exclusion process must be reasonable, and narrow enough so that it does not undermine the intent of the relief,” Paul said. “The goals of restoring American industries to a sustainable operating domestic capacity and protecting national security must remain paramount.”

A study by the Coalition for a Prosperous America which supports the tariffs concluded the US economy will add about 19,000 jobs. And the services sector will add another 6,000 jobs. However, there’ll be roughly 25,000 job losses in the manufacturing sector – slowing down the economy by 8/1000 of 1%, or $1.4 billion, in the short term.

“The net job loss is close to zero, and the reason for that is steel prices and aluminum prices go up far less than the tariff amounts,” Jeff Ferry, CPA’s research director has said. “The net gain comes from a couple of places; first, the steel and aluminum jobs have higher wage and incomes than average manufacturing jobs, so the economy benefits from growth in industries with higher pay levels than average.”

Start typing and press Enter to search

nuclear power plant