CLEVELAND, March 13, 2018 /PRNewswire/ — Two months after placing tariffs on imported washing machines and solar panels, President Trump imposed tariffs on steel and aluminum imports last week. The tariffs will increase the cost of imported steel and aluminum by 25% and 10%, respectively. While this advances President Trump’s America First agenda, a number of US trading partners are seeking exemptions or planning retaliatory tariffs, and the overall impact on the American economy is uncertain.

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While Canada and Mexico are temporarily exempt while the future of NAFTA is being negotiated, the tariff is applied uniformly to all other countries, some of which are reconsidering their business relationships with the US. For instance, even before the tariff was formally announced, Sweden’s Electrolux placed its planned $250 million plant expansion in Tennessee on hold. Although Electrolux utilizes US-produced steel at its plant, the company anticipates that the cost of appliances produced in the US will increase and has postponed investment in US operations as it evaluates the full impact of the tariff.

Another potential impact is a shift away from US manufacturing. The markets for appliances and motor vehicles in the US, two industries that use significant amounts of steel and aluminum, are supplied by both domestic production and imports. As manufacturing these products in the US becomes more expensive, imports may have a competitive advantage on price, which would counteract the president’s intention with the tariffs.

The tariffs will benefit workers directly involved in steel and aluminum production. Still, the number of American workers in steel- and aluminum-using industries is substantially higher than workers in the steel and aluminum production industries. An increase in the cost of imported steel and aluminum will likely cause price increases on finished goods. For expensive products such as heavy machinery, motor vehicles, recreational vehicles, and boats that are still produced in the US in significant numbers, the cost increase will be noticeable. “At the end of the day, the tariff will hit consumers where it matters most, their wallets,” says Freedonia analyst Kyle Peters. “US businesses will also find it harder to compete overseas, as the cost of their product becomes more expensive.”

For more information, see Freedonia’s studies covering appliances, HVAC equipment, machinery, motor vehicles, and recreational boats and motor vehicles. Browse by category here:

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