Will steel and aluminum tariffs hurt American retailers?
Photo: Getty Images

Will steel and aluminum tariffs hurt American retailers?

A number of retail trade groups have railed against President Trump’s move to impose tariffs on steel and aluminum, concerned that the actions may spark a trade war.

“A tariff is a tax, plain and simple,” said Matthew Shay, president and CEO of the National Retail Federation (NRF), in a statement. “In this case, it’s an unnecessary tax on every American family and a self-inflicted wound on the nation’s economy.”

He noted that consumers are just beginning to see more money in their paychecks as a result of the new tax reforms, but those gains will soon be offset by higher prices for products ranging from canned goods to cars to electronics.

“The retail industry is extremely concerned by the administration’s apparent desire to ignite a trade war, where the net losers will be the very people the president wants to help,” said Mr. Shay. “On top of steel and aluminum tariffs, retailers are troubled by the direction of the ongoing NAFTA negotiations and the threat of additional tariffs on consumer goods from China.”

The order levies duties of 25 percent and 10 percent, respectively, on imported steel and aluminum. Canada and Mexico were made exempt from the action, pending a renegotiation of NAFTA.

Hun Quach, VP of international trade, Retail Industry Leaders Association (RILA), said, “The administration’s desire to challenge other country’s trade violations is an important goal for free and fair trade, but a broadly applied tariff could spark a potential trade war that zaps consumer spending and American exports.”

Gary Shapiro, president and CEO, Consumer Technology Association (CTA), said the move could ultimately cost “far more” American jobs than it creates. Said Mr. Shapiro, “The imposition of tariffs will undoubtedly result in previously uninvolved sectors being retaliated against and create a dangerous race to the bottom, which is a threat to our domestic economy and the entire global trading system.”

Several trading partners, including the European Union, have stated that they will slap retaliatory tariffs on key U.S. products in response to the administration’s action. China has criticized the move, but has stopped short of threatening to retaliate so far.

The administration asserts the tariffs will provide protection for American industrial workers and has also called metals production vital to national security.

BrainTrust

"The U.S. economy is driven by consumer spending, not corporate spending. So when you limit consumer spending, you hurt the economy."

Phil Masiello

Founder and CEO, CrunchGrowth Revenue Acceleration Agency


"Imposing tariffs flies in the face of all the trade deals executed in the last 20+ years. Tariffs were negotiated away because they hurt the country. "

Camille P. Schuster, PhD.

President, Global Collaborations, Inc.


"You can’t use 20th century policy practices in a 21st century global market."

Peter Charness

Retail Strategy - UST Global


Discussion Questions

DISCUSSION QUESTIONS: Do you see tariffs on steel and aluminum having a negative effect on the retail industry? What sectors of retail, if any, do you think would be most affected?

Poll

16 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Bob Amster
Trusted Member
6 years ago

Matthew Shay said it —this will hurt consumers first and, subsequently, retailers. The domestic steel and aluminum industries will only benefit if they can manufacture at prices lower than tariffed imports and if they can produce in the quantities the market demands. Outside of steel and aluminum, American businesses will be punished because retaliatory tariffs on our exports will be imposed by other countries.

Kai Clarke
Kai Clarke
Active Member
6 years ago

Although the very concept of imposing tariffs has been a poor economic move, and one that has been proven to be a losing proposition, this tariff is more bluster than anything else. By leaving off Canada and Mexico, we allow two of our largest trading partners to continue their steel and aluminum exports unabated. Retail should see very little change, and the stock market is reflecting this as many retailers continue to grow and the overall Bull market continued to grow on Thursday and then set record levels for many stocks on Friday. Even heavily-dependent industries like beer, soda, airplanes and heavy equipment saw their stocks go up on these days.

Retailers have other issues to focus on rather than the potential for the cost of a can of soda to go up 2 cents. Out-of-stocks, housebranding, competition from foreign chains (Aldi and Lidl), omnichannel marketing and price competition all play bigger roles than a shift in the cost of steel and aluminum.

Ben Ball
Member
Reply to  Kai Clarke
6 years ago

Agree Kai. This episode will end up better billed as “threat of tariff” than “tragedy of tariff.”

Lyle Bunn (Ph.D. Hon)
Lyle Bunn (Ph.D. Hon)
6 years ago

The tariff only applies on imports and so perhaps a greater portion of domestic production will be directed to the containers, racks and buildings that constitute retail. The integrated economies of North America have long worked to supply domestic needs as a first priority, which is the strong basis for ongoing economic development policy.

Peter Luff
6 years ago

First of all, for the U.S. economy any sector of retail which operates internationally becomes at risk as this escalates. Medium-term that will put pressure on American jobs and tax income. Secondly, the local industry is not playing in such a price-competitive market so prices locally will not be held down by international competition. The net impact will be local goods will become more expensive, with more taxes on consumers. Longer-term, U.S. industry including retail will become less competitive; long-term they fall behind those playing in an open market.

Phil Masiello
Member
6 years ago

The tariffs will raise the cost to the consumer more than the retailers. Retailers will pass the additional costs to the consumer.

I see these tariffs having a negative effect on the economy as a whole. This will begin the rise of inflation.

The U.S. economy is driven by consumer spending, not corporate spending. So when you limit consumer spending, you hurt the economy.

David Weinand
Active Member
6 years ago

The biggest impact will be if E.U. and Asian countries initiate retaliatory tariffs on our goods (e.g. Levi’s jeans, motorcycles, etc.). I don’t see the tariffs greatly impacting margins of retailers in other ways.

Zel Bianco
Zel Bianco
Active Member
6 years ago

While I agree with the comment from Kai that retailers have bigger fish to fry than this, it will indeed have a ripple effect throughout the industry and one that is self-inflicted. Targeting a very small group that this will help is not a reason to hurt almost everyone else. Pittsburgh has long lifted itself out of being a steel and coal town in favor of high tech and medical industries which has made Pittsburgh a great place to live and work. There are very few people in that area who want their sons or daughters to go back to an industry that they have worked so hard to get away from. Manufacturers are already dealing with being squeezed to lower prices and now this? Not good.

Ryan Mathews
Trusted Member
6 years ago

First of all, before we declare that the sky is falling let’s determine which tariffs we are talking about: the first set that applied to everyone; the modified, “doesn’t apply to Mexico or Canada, or other countries if they ask nice” set, the “will apply to Canada and Mexico if NAFTA talks don’t go, ‘well,’ — whatever that means” set or, the “wait a minute until our trade policy mysteriously morphs again” set.

That’s one of the problems here, there is no policy, just a set of fluid pronouncements.

Setting that aside to answer to question, of course broad tariffs on raw materials are a de facto tax on consumers and manufacturers and that will raise prices and, probably, lower sales. As to which sectors, it begins with those that use steel and aluminum — consumer packaged goods, beverages, supermarkets, construction, consumer electronics, automotive, etc. and then impacts all exporters to places like the European Union that may levy their own tariffs.

In other words, it’s much easier to figure out whom it doesn’t impact because that is a null set of industries and consumers.

But as I said, there’s no need to panic until we see who the last person to speak to the President is.

Gene Detroyer
Noble Member
6 years ago

Been there, done that! Bush tried it, it cost jobs.

Retailers will not be affected by pricing or margins. They may not even be affected by volume. What this does (we will see about Canada and Mexico, 25 percent of U.S. steel imports) is make foreign made toasters, refrigerators, automobiles, etc. relatively less expensive than the same products made domestically.

Plain and simple, this (and any tariff) is a tax on the American consumer who buys domestically manufactured products.

Dick Seesel
Trusted Member
6 years ago

To Ryan’s point, it depends on whether the tariffs are as sweeping as first announced or modified on a country-by-country basis. But any widespread trade war with the EU and other trading partners is dangerous for a couple of reasons: First, domestic manufacturers will pay more for raw materials on everything from soda cans to cars — and will pass those price increases along to consumers. Second, foreign demand for exported products from Levi’s to cranberries will fall. Neither one of these is good for retailers, or for the economy as a whole.

Camille P. Schuster, PhD.
Member
6 years ago

Protectionism did not work well the last time tariffs on steel were imposed. Imposing tariffs flies in the face of all the trade deals executed in the last 20+ years. Tariffs were negotiated away because they hurt the country. President Trump said he hoped the steel industry would use this time to modernize. With no requirement to do so, they are not likely to do that. Last time they did not and we were even less competitive when the tariffs came back. In this case history repeating itself is not a good thing.

Peter Charness
Trusted Member
6 years ago

As well as all the economic costs to consumers that have been noted, what a tariff like this one does in some respects is decrease the financially viable size of the market and creates an oversupply scenario to the non tariff countries. And that serves to reduce the cost of that product to the non tariff countries which will boost their competitive positions, allow them to produce finished goods and have an overall advantage over US exports. You can’t use 20th century policy practices in a 21st century global market. Might as well go back to a gold standard. Oh wait, that’s been discussed as well, hasn’t it….

Craig Sundstrom
Craig Sundstrom
Noble Member
6 years ago

It’s difficult to judge the effects because of confusion over what’s being done (imagine that?), such as what product classifications are being included, whether or not it includes finished products or only raw materials, what countries, etc.

As to who what sector(s) will be affected most, presumably products that make use of them: cars and appliances for steel, packaging for aluminum … of course it’s at times like these that we receive an education in what’s really involved in making what we buy.

Ricardo Belmar
Active Member
6 years ago

The threat to retailers has more to do with escalation than the direct steel tariffs. If other trading partners start to retaliate and introduce tariffs on goods exported from the US that our global retail brands depend on, there could be a significant impact.

Generally speaking, these types of tariff/trade battles have never shown any of the positive impacts being claimed and have almost always had an adverse effect. However, given the amount of tariffs we are talking about I don’t see much direct impact in the short term to most retailers. Long term, if this leads to trade wars, then we can accept Matthew Shay’s and Gary Shapiro’s comments as a practical certainty.

Ed Rosenbaum
Ed Rosenbaum
Member
6 years ago

I am not intending to make this a political response. That said, somehow the President is doing this to antagonize those smart enough to know it will not work. The American worker will suffer thus lowering the spending power some of us received; thus diminishing retail sales. Lower income equals lower buying power. We were given that for a short period of time, now we are having it taken away. Not only that, we will be taxed on shipments sent to other countries, again lowering sales. And the saga continues until smarter people convince those not quite up to par with knowing how things work to get an understanding.