The Effect of Steel Tariffs on Construction & Transportation

by Madison Eklund
May 1, 2018

Trump’s steel tariffs could impact the construction, equipment and trucking industries.

Last month, President Trump imposed a 25% tariff on steel imports, and a 10% tariff on aluminum imports. For the construction industry, this could mean a jump in costs.

The tariffs, which have been active for about a month, were enacted to encourage more use of U.S. steel and help generate jobs. A temporary exemption was made for Canada, Mexico, South Korea, Argentina, Australia, Brazil and other countries in the European Union. Trump will decide on May 1st if he wants to continue these exemptions.

What does this mean for the the construction, equipment and trucking industries?

Costs and competitiveness could increase throughout these industries. Raw metal prices are likely to rise right off the bat, which will create higher prices throughout each industry’s supply chain.

The Motor & Equipment Manufacturers Association posted statements opposing the tariffs, stating the “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,” and will ultimately “be detrimental to the jobs that the motor vehicle parts supplier industry created.” MEMA represents more than 1,000 companies that manufacture vehicle parts and components. Their affiliates include the Heavy Duty Manufacturers Association and Original Equipment Suppliers Association.

Whether fleets will have to pay more for their vehicles and equipment depends on “where OEMs and upfit vendors source their steel and aluminum, and how much of these materials they source from foreign producers,” ARI's director of vehicle supply chain, Partha Ghosh, explained in an article last month.

Furthermore, vice president of sales and marketing for Merchants Fleet Management, Tom Coffey, thinks it is likely the tariffs will create more jobs in the short term. However, for “manufacturers that have depended on imports for some of their supply chain raw materials there is the strong possibility they will pass through to consumers and businesses their increase cost of goods,” said Coffey.

Industry backlash

Over 1,200 American companies have submitted waivers to the Commerce Department requesting exemption from the steel tariffs. And many lawyers and business leaders involved think this is just the beginning of company pushback for greater exemptions. In their applications, companies argue that they need a unique item that cannot be made domestically, and the Commerce Department has to decide whether that is the true case.

MEMA vice president of government affairs, Ann Wilson, argues the exemption process is too difficult for smaller manufacturers. In a statement to Congress earlier this month, she said, “The exclusion request process lacks transparency and will be particularly burdensome for smaller manufacturers. It is unbalanced and appears to not allow for successful outcomes for downstream users." Congress responded with a phone number and email address where companies can reach out to seek help when filing waiver applications.

Overall impacts

It's too soon to tell exactly how Trump’s steel and aluminum tariffs will play out. Next week, the industry will wait and see if the various country exclusions will renew, and then move on from there. If the Commerce Department grants waivers for companies, this could further dilute the effect of the tariffs causing the administration to possibly reevaluate its purpose. While politicians and organizations openly oppose the new tariffs, the industry will be forced to continue to adjust to the new changes. The question remains — just how temporary (or concrete) could these changes be?

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