According to a research note from Moody’s, the downstream metal sectors are in for a struggle thanks to higher prices - especially on the aluminium side, if shipments from Canada are included in the scope of the tariff.
“If implemented, the tariffs will likely lead to significant increases in steel and aluminium prices in the US, which will hurt domestic industrial manufacturers that rely on these commodities as key raw materials in production,” David Berge, senior vice president at Moody’s, said in a statement accompanying the note on Friday March 2.
“Downstream aluminium fabricated producers [which purchase prime aluminium and scrap for re-melting and processing] will see raw material costs rise, potential supply shortages, and possible customer push-back,” Carol Cowan, senior vice president at Moody’s, said in the note.
“The downstream producers generally operate on a cost pass-through model, although there is a lag effect, and use a mix of scrap and prime material for their raw material mix depending upon the product they are producing,” Cowan said. “As the US is not self-sufficient in primary aluminium production, they source their material from many places. Given these dynamics, we expect costs to rise across the supply chain.”
This sentiment is driving downstream market participants to voice their dissatisfaction with the decision. But Trump doubled down on tariffs in a series of tweets on March 2, arguing that a potential global trade war could benefit the US industry.
“When a country [the United States] is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” Trump wrote. “[For] example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore. We win big. It’s easy!”
Auto, aero, construction segments against tariffs
Participants in the automotive, aerospace, and building and construction segments came out against Trump’s tariffs.
“The burden of these tariffs, as always, will be passed on to the American consumer,” American International Automobile Dealers Association president and chief executive officer Cody Lusk said in a statement March 1. “Car shoppers looking for a deal will instead find that they are paying a new tax to transport themselves and their families.”
“President Trump shouldn’t undercut his own goal of helping US manufacturers ‘win’ again by imposing counterproductive tariffs on steel imports," Association of Equipment Manufacturers president Dennis Slater said.
Companies, too, spoke in opposition to the measures.
“We are disappointed with President Trump’s announcement of a 10% tariff on aluminium... American workers and American consumers will suffer as a result of this misguided tariff,” Molson Coors Bewing Co subsidiary MillerCoors said in a tweet March 1.
The Beer Institute - a Washington-based trade group - argued that Trump’s decision, if implemented, would create a $347.7-million tax on America's beverage industry and result in the loss of 20,291 American jobs.
Votes of confidence
But not all American companies shared that view.
“The bottom line is we support trade policies that enable US manufacturers to win and grow jobs in the US, and at the same time succeed in global markets,” General Motors said.
During a televised meeting with top executives for metal companies yesterday, Trump confirmed that he planned to sign off on the tariffs in the coming week, and that the tariffs would remain in place for “a long time.” He was met with positive responses from those executives.
"This is vital to the US; this is our moment and we need to get it right," David Burritt, president and CEO of U.S. Steel, said during the meeting. Further, Burritt "trusted Trump's judgment" on 232 remedies and agreed that tariffs would be effective to combat metals transshipment.
"It's a whack-a-mole game. It's time for the whack-a-mole game to end," he said.
Downstream market participants in both steel and aluminium were in a state of alarm following President Donald Trump’s confirmation that he intends to levy tariffs on imports of both metals into the United States.