Could Tariff Retaliation Harm the U.S. Shipping Trade?

Posted by World Trade Distribution
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Filed Under: Container Freight

ShippingContainerSFBayMany big players in the steel industry cheered at the announcement that steep tariffs were to be imposed on foreign steel and aluminum imports. With more limited competition from outside the country, these steel producers believed, their own profits were poised to soar. But while these tariffs may have a positive impact on local steel and aluminum producers, they could hurt the industries that depend on products and equipment made with these imported metals. And if foreign suppliers begin instituting retaliatory tariffs on U.S.-based products, this measure could seriously harm the entire shipping trade. Read on to learn why many analysts are concerned about the prospect of tariff retaliation.

Potential Harm to Steel-Heavy Industries

While the prospect of locally sourcing a company’s steel and aluminum supply is a good one, it’s just not feasible in many parts of the country. Automobile and parts manufacturers heavily rely on foreign steel to create their vehicles and vehicle components, and many of these components are shipped overseas immediately upon their manufacture.

It’s possible that an increase in demand for U.S.-produced steel will cause local steel producers to ramp up their production, but seems unlikely that this rapid expansion will happen quickly enough to ensure that current production levels stay stable over the short term. Many U.S. steel and aluminum suppliers have been vulnerable to concerns about product quality or natural disasters that have the potential to halt production indefinitely.

In addition to these logistical concerns, foreign consumers of these products may opt to slap their own tariffs on imports, decreasing demand for U.S.-supplied vehicles and parts.  

The Projected Impact of Retaliatory Tariffs

Shippers and import freight workers also worry that retaliatory tariffs on popular foreign products like clothing, coffee, plastics, and other consumer staples will raise prices and decrease demand. Cost-conscious consumers are unlikely to accept an overnight 20 to 30 percent increase in price on their favorite items, and, unlike steel and aluminum, there’s often no U.S.-based equivalent with which to replace them. With the shipping industry constantly facing new regulations that often cut into shippers’ bottom lines, analysts worry that their ability to absorb any other changes in cost is all but exhausted.

Some predict that the combination of retaliatory tariffs and a sharp increase in demand for U.S.-produced steel and aluminum is likely an unprecedented and immediate increase in consumer prices. While these tariffs are designed to boost the U.S. economy and increase stateside production of valuable metals and building materials, their more immediate impact is likely to be felt in consumers’ wallets.

Apr 18 2018

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