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Views mixed on proposed tariffs for steel, aluminum

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A Hershey's Kiss wrapper. A can of Yuengling beer. Bridges.

When it comes to the commonwealth, products made with steel and aluminum are everywhere.

So what does it mean if a tariff is imposed on those materials if they come from another country? President Donald Trump last week said he would impose steep tariffs on steel and aluminum imports.

“Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world,” Trump wrote in a tweet on the morning of March 1. “We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!”

The tariffs, Trump said, would be 25 percent on steel and 10 percent on aluminum. And while the measures aren’t expected to be signed until later this month, he doubled down on Monday, saying he would not exclude any country from the tariffs.

Some advocates in the steel and aluminum industries have already commended the proposal. Others are worried about the potential effects, especially on companies that consume steel and aluminum.

Pennsylvania’s U.S. senators, Bob Casey (D) and Pat Toomey (R), are split on the issue, with the Democrat in favor and the Republican opposed.

“When countries cheat on trade, Pennsylvania workers lose,” Casey said in a statement, commending the president’s actions. “I urge the Administration to follow through and to take aggressive measures to ensure our workers can compete on a level playing field. When the playing field is level, Pennsylvania workers will outcompete any in the world.”

Toomey, on the other hand, cited the success of past rulings that have helped confront countries engaging in illegal trade practices, such as dumping steel or illegally subsidizing it. The U.S. should continue to use existing tools to combat those actions, he said.

“The U.S. only imports 2 percent of its steel from China. Changing course from this approach by invoking national security as a means of imposing new, huge tariffs on all kinds of imported steel is a big mistake that will increase costs on American consumers, cost our country jobs, and invite retaliation from other countries,” Toomey said in a statement.

Tina Weyant, executive director at the World Trade Center Harrisburg, also cited the potential for retaliation.

“There’s going to be consequences. There’s no doubt about it,” she said, adding that the mechanism Trump is using to impose tariffs is the Trade Expansion Act of 1962, which grants the Secretary of Commerce the authorization to make restrictions when imports “endanger national security.” This action, Weyant said, is upsetting to the country’s closest allies. Though U.S. steel and aluminum companies will benefit, she said, those companies relying on imported raw materials will be hurt.

“This will hurt U.S. competitiveness in these industry sectors, and provide an incentive for offshoring. Consumers tend to pay the price, in this case, the U.S. consumer,” Weyant said.

What’s more, according to the Steel Import Monitoring and Analysis System, maintained by the U.S. Department of Commerce, the largest sources of steel in 2017 were Canada, Brazil and Korea. China ranked No. 11. The U.S. imports the most aluminum from Canada, Russia, China, Russia and the United Arab Emirates.

“There will likely be some retaliation from our major trading countries,” she said. “And how will our relationships (with these nations) be after? How will they be affected?”

Weyant also noted that while the motivation for the tariff may be to revive domestic industry and potentially create more jobs, therein lies additional uncertainties.

“If we would ramp up our steel industry, could we meet the demands? And (we) assume we’d create a lot of jobs, right? How much would will actually be created and how much would actually be robots?” she said. “It’s something else to consider.”

Mantec Inc. President and CEO John W. Lloyd also worries that the proposed tariffs could have the opposite effect. Based in York, Mantec partners with manufacturers to improve their operations.

“In the global economy, trade barriers and tariffs could bring unintended consequences and adversely affect commerce with our allies and trading partners,” he said.

Roy Hardy, president of the Precision Metalforming Association, and Dave Tilstone, president of the National Tooling Association, released a joint statement saying that the tariffs would “imperil” the country’s manufacturing sector, which employs 6.5 million Americans compared to the 80,000 employed by the country’s steel industry.

“The tariffs will lead to the U.S. once again becoming an island of high steel prices resulting in our customers simply importing the finished part. The lost business to overseas competitors will threaten thousands of jobs across the United States in the steel-consuming manufacturing sector, similar to our experience in 2002 when the U.S. last imposed tariffs on steel imports,” the statement read. They also pointed to the loss of 200,000 American manufacturing jobs as a result of the last attempt at imposing steel tariffs.

Though he had not canvassed the nearly 9,000 members in the commonwealth’s largest broad-based business advocacy association, Gene Barr, president and CEO of the Pennsylvania Chamber of Business and Industry, said the country “ought to make sure we do what’s reasonably necessary” to make sure trade is “free and fair.”

And whether local producers are really affected by this change will hinge on how much of their final cost is in aluminum and steel, said Mark A. Price, a labor economist at Keystone Research Center, a left-leaning think tank in Harrisburg.

“So for instance, if 1 percent of the price of a Hershey’s Kiss is aluminum, then a 25 percent increase in aluminum prices will yield an increase in the cost of a Hershey Kiss by 0.2 percent. On the other hand, if 75 percent of the price of a Hershey Kiss is aluminum, then a 25 percent increase in aluminum prices will yield an increase in the cost of a Hershey Kiss of 11 percent,” Price said. “So even if aluminum and/or steel are widely used, where the tariffs will matter most will be where aluminum or steel represents a substantial portion of the cost of the final product.”

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Emily Thurlow

Emily Thurlow

​Emily Thurlow covers York County​ for the Central Penn Business Journal. Have a tip? Drop her a line at ethurlow@cpbj.com. Follow her on Twitter @localloislane.

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