Tariff plan needs amendment to allow for advance planning
Business Journal reporting on the impact of President Donald Trump’s proposed steel and aluminum tariffs shows even the suggestion of such a policy shift already had pushed prices by 8 percent. Michigan’s vast investment in manufacturing vehicles — and West Michigan’s dominance of automotive manufacturing suppliers — create a unique vulnerability. Add to that the building boom that continues in the Grand Rapids area that will see the impact, especially on new projects as well as the cost of those not yet finished. Beer City, USA, also will see the impact of the aluminum price hikes.
The quick price jump was attributed to the fact not enough steel mills currently are operating to meet the anticipated demand under the current tariff proposal. Existing mills already are increasing their prices to match imports.
The Business Journal favors an approach proffered by Grooters Development Co. owner Robert Grooters. He told the Business Journal, “As we get this 25 percent increase, how can we possibly adjust to that kind of increase in one shot? My belief is we need fair trade, but we need to step into it slowly — for example, maybe 5 percent a year, work yourself up to it.” He also provided an educated guess the tariffs could compel companies to stay away from new builds and instead lease existing space, escalating rental rates.
Grooters also summarized the pinch to aluminum and steel customers that has been immediate, rather than planned and phased in. “We have to order these buildings by next week,” he said. “Already it’s gone up 8 percent, and beyond that, they’re not quoting how much. Because the (tariff) went through at 25 percent.”
The certainty customers will be hurt by increased costs also is represented by Alro Steel in Grand Rapids, a national metal processor and distributor with multiple Michigan outlets. Brian Glick, vice president of business development and marketing, told the Business Journal, “We import quite a bit of steel, most of it because we have to. You can’t get it in the U.S.”
Founders, Grand Rapids’ largest beer distributor by far, also is bracing for the unexpected hit. The brewery estimated it will purchase on average more than 10 million cans every month in 2018. This is in addition to the millions spent by Founders and other brewers in large fermenters and equipment made of steel.
The ripple effect on jobs here and across the state, and the nudge toward inflation as consumer costs go up, can’t be denied. Phasing in tariffs and giving business owners the opportunity for advance planning should be considered as the details come together.