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steel tariffs

How could the steel tariffs affect your business?

President Trump has recently announced tariffs on imported steel and aluminum. Affecting incoming products from many countries, the tariffs will levy 25 per cent on imported steel and 10 per cent on imported aluminum.

For now, Canada and Mexico are exempt, pending further trade negotiations with the two countries.

Trump signed the orders at the White House surrounded by steel and aluminum workers holding hard hats. “A strong steel and aluminum industry is vital to our national security, absolutely vital,” Trump stated during the signing. “Steel is steel. You don’t have steel; you don’t have a country.”

Even before taking office, Trump stated that he felt tariffs would contribute to the growth of the American economy and would help balance the country’s trade deficit.

Opinions Vary on Tariffs

Domestic steel workers are praising the recent ruling, as it’s giving the beleaguered industry a leg up. In recent years, foreign-produced steel and aluminum have flooded the U.S. market. The tariff is expected to curtail that influx.

Many in the trade industry aren’t pleased, however. For instance, D.C.-based Trade Partnership Worldwide, LLC, an international trade and economic consulting firm, stated in a policy brief that while the tariffs would have a positive impact on the nation’s steel and aluminum producers, they would have a more far-reaching negative impact on other industries, including the construction industry.

Chairman of the National Association of Home Builders Randy Noel issued an official statement expressing dissatisfaction with Trump’s ruling.

Those against the tariffs believe there will be a detrimental increase in costs for industries currently using foreign steel and aluminum. This includes the U.S. building industry.

National Association of Home Builders Opposes Tariffs

Chairman of the National Association of Home Builders (NAHB) and home builder and developer Randy Noel issued an official statement expressing dissatisfaction with the ruling. He notes that the tariff will translate into higher costs for consumers and businesses, including home builders.

“Given that home builders are already grappling with 20 per cent tariffs on Canadian softwood lumber and that the prices of lumber and other key building materials are near record highs, this announcement could not have come at a worse time,” Noel says in the statement. “Tariffs hurt consumers and harm housing affordability.”

Not everyone in the housing construction industry feels this way. Scott Harris, COO and co-founder of the Los Angeles-based building development company, Building Construction Group, disagrees. “I think the headlines regarding the tariffs are a little overrated and sensationalized as far as the impact on the overall construction industry goes,” says Harris.

Steel is Just a Commodity

“Steel is a commodity—like so many others in the construction industry—that is price-adjusted through supply and demand,” says Harris. “It’s important to remember that America is a major source of steel through mining and recycling efforts. That means we’re not discussing shortages as much as asking the question: Can we now increase our manufacturing efforts and decrease our costs? If the answer is no, the demand will decrease and so will, therefore, the costs. This is the inherent beauty in commodities—they always balance themselves out.”

Harris also notes that the largest share of construction in the United States is not commercial, which has the highest steel demand, but residential.

“Residential actually has a low steel requirement, so the impact may be minor,” he says. “If we were to estimate that steel makes up 10 per cent of a home conservatively, and it may potentially see a 25 per cent increase in cost, the net difference on the construction cost is a mere 2.5 per cent. That’s negligible overall and within normal price fluctuations.”

Harris sees the tariffs as an overall positive. “The tariffs will create new jobs in the steel and aluminum industries. And as a result, the U.S. will be less dependent on foreign sources for our materials. Overall, I think this is great thing.”

Time will tell how the tariffs will affect the building industry.