In March, President Trump imposed the largest tariffs in decades on steel and aluminum imports — 25 percent on steel and 10 percent on aluminum — from most countries.

In the months since, many of the impacted countries have responded with tariffs on U.S. products. Foremost has been China, which has taxed hundreds of American-made goods. The U.S. has retaliated, and China has reciprocated again and again, in what many now call a US-China trade war.

The European Union, Mexico and Canada have been hit by these tariffs and responded in kind, too.

The Trump administration has insisted that the damage to firms that buy steel and aluminum will be temporary. It said the same about the pain felt by other industries hit by retaliatory tariffs, such as soybeans and agricultural products.

A handful of U.S. steel companies have opened new plants this year. But companies elsewhere in manufacturing supply chains have announced layoffs and cutbacks, hindered by higher prices of steel.

Steel is a unique good that is used in almost every part of the supply chain. Manufacturing companies need it, of course; but it’s also an integral part of the trucks and airplanes that move goods and the factories that produce those goods.

In other words, tariffs on steel and aluminum aren’t just impacting the immediate buyers of those goods. They’re rippling through manufacturing and shipping — all the way to end consumers.

Tariffs on Steel Are Disrupting Supply Chains

How is steel of interest to shipping-based companies? For starters, there are about 17 million shipping containers in the world, primarily made of steel, and they’re moved by ships and trucks that are also primarily made of steel. Plus, steel is an essential material for most construction.

The U.S. actually manufactured most of its steel before the Trump administration imposed its tariffs. Only about a third of steel used in the U.S. in 2017 was imported, according to the U.S. Department of Commerce. But the government hoped to drop that to about 20 percent.

Although most of the president’s rhetoric surrounding tariffs has been directed at China, only about 2 percent of U.S. steel comes from that country. Our largest source of steel is Canada — an ally, NAFTA partner and neighbor.

Trump spared Mexico and Canada from the steel tariffs shortly after they were announced. He then delayed the tariffs by about three months. When they finally took effect May 31, both NAFTA partners and the European Union were included.

What could manufacturers do? They had to either spend 25 percent more on steel from foreign sources or expand their budgets to buy from U.S. producers.

Whichever avenue manufacturers chose, their costs increased. And they passed those costs on to their customers — including the shipping carriers buying their trucks or the end consumers purchasing the goods those trucks would move.

Price increases and changes in materials sources are disruptive, however. When one player in a supply chain switches its supplier or increases prices, the rest of the supply chain has to adjust accordingly.

That’s been happening across the U.S. economy, all summer.

Related: Find Out How Much You’re Losing to Billing Errors With a Free Invoice Audit

Companies Are Asking For Tariff Exemptions — and Most Are Getting Denied

One key objection of manufacturers to these tariffs was that the U.S. simply doesn’t produce enough steel to meet industrial production needs.

To satisfy those concerns, the government established a process by which companies could request to be “excluded” from tariffs.

In late June, The New York Times reported that the Commerce Department granted the applications of seven companies, covering 42 products; but it rejected applications from 11 companies, covering 56 products.

Some of the applications it rejected were because U.S. steel manufacturers insisted they could meet the needs of application companies.

The Department of Commerce said no to others because the manufacturers argued that buying U.S. steel would raise prices. That was not a good reason for exemption, Secretary of Commerce Wilbur Ross told the Times.

“Many of the requests are effectively requesting relief simply because the product prices are higher than they would be with the imports, and that’s not a sufficient reason to grant the exclusions,” Ross said.

In June, there were about 20,000 applications waiting for review.

Some Manufacturers Are Facing Workforce Reductions

The last time the U.S. imposed steep steel tariffs was in 2002 and 2003, under President George W. Bush. In the years following that move, Supply Chain Dive reported, imports of finished goods actually increased — because some companies moved their factories out of the country, imported raw materials to those nations, then sent their finished products to the U.S. market.

Other American manufacturers say they’ve been forced to cut employees to maintain their bottom lines.

Trade Partnership president Laura Baughman told Supply Chain Dive in March that her lobbying group had researched the impacts of tariffs. Their estimate was that 18 jobs would be lost across the economy for every job created in the steel and aluminum industries.

Altogether, Baughman predicted, tariffs would grow steel and aluminum employment by about 26,000 people. But they could cost about 495,000 in other parts of the economy.

It’s too soon to say whether those predictions will be borne out.

But it’s already clear that import tariffs on steel aren’t only relevant to steel manufacturers and buyers — they touch almost every supply chain in some way.

In order to adapt to sweeping changes in the supply chain, companies need an intimate understanding of their production process.

They need to choose the right metrics to watch most closely, based on those that most effectively optimize their networks.

This is what Reveel offers to companies as they plan their shipping budgets: our team of experts can help executives figure out which shipping metrics to track, identify inefficiencies and negotiate contracts that eliminate those inefficiencies.

While we can’t see into the future, we can help our clients build agile, efficient supply chains, and figure out what to do when sudden surprises arise.

Reach out today to get started.

Schedule a Consultation

Ready to leverage the power of Shipping Intelligence for your company? Contact us today to schedule a consultation.

Schedule Now