LOGAN — Some Utah companies could be heavily impacted by soon-to-be enacted taxes aimed at steel importers.
President Donald Trump Thursday ordered major tariffs on imported steel and aluminum in an effort to combat what he called an "assault on our country" by foreign competitors.
The new tariffs — 25 percent on steel and 10 percent on aluminum — will take effect on March 23. While the president believes the tariffs will even the playing field for U.S. steel manufacturers, critics argue the changes will create a trade war that will drive prices up to the detriment of American businesses and consumers.
"It could be a big problem," said Jason Mons, chief operating officer at Logan-based S&S Worldwide Inc. — the largest maker of amusement rides in the nation. "There are a lot of different ways it affects us."
Noting steel as the main component of their manufacturing process, he said the new tariffs would likely prompt a significant rise in production costs as producers adjust prices to offset the new tariff charges.
"The costs alone will be a problem for us," Mons said. "We've already seen significant increases over the past couple of months just because of the announcement that this could happen."
The uncertainty that's been created has caused problems within the global supply chain, he said. S&S Worldwide has a project life cycle of 18 months to three years and the company has already begun signing contracts that 'lock up" pricing well in advance. Mons fears the new tariff policy could complicate the process.
"Something like this coming along mid-stream in a project could be very problematic from a financial perspective," Mons said. Because the company develops projects that may include more than a million pounds of steel, the tariffs could cost his firm hundreds of thousands of dollars per project.
He said his company buys raw steel from a local supplier that gets the product from various sources in numerous countries.
"We just call and say we want steel and what they've got in their yard that meets (our) criteria is what shows up at our doorstep," he said.
Considering the breadth of the tariffs, he said there is a good likelihood of steel prices rising worldwide, which will result in higher prices for everyone.
Because of the strength of the dollar, he noted that American companies like S&S Worldwide have been at economic odds with many European competitors whose products were more favorable to many customers.
"And now you're going to add a tariff on top of that," Mons said. "So we are at a double disadvantage right now compared to our European competition."
Meanwhile, the president exempted Canada and Mexico from the duties as "a special case" while negotiating for modifications to the North American Free Trade Agreement. In a previous meeting with his cabinet, the president suggested that Australia and "other countries" might also be spared, a change that could temper the international impact following warnings of reprisal from some global U.S. trading partners.
In Utah, there are more than 200 local companies that use steel as raw goods in their manufacturing process, explained Derek Miller, president and CEO of World Trade Center Utah. He said the new policy will likely have an adverse effect on those and other companies that do business with them.
"We've got a lot of advanced manufacturing in this state," he said. "The impact (will be) increasing their costs, increasing the prices of their raw materials and making them ultimately less competitive in the global marketplace."
Miller said while Trump may have good intentions with the tariffs, the outcome will be decidedly detrimental to the U.S. and therefore the local economies of states like Utah.
"His concept is a good one: 'Let's help our friends and let's punish our enemies as it relates to trade,'" Miller said. "I just don't think what he's unveiled is in line with that policy."
He added that 'inserting uncertainty into the market' in a time when the national economy is growing would seem to the opposite of what should be done in this current business climate.
"We just went through tax reform, which was designed to give a boost to the economy," Miller said. "Now, to reinsert uncertainty back into the back into the economy is really counterproductive and counter to what the president has said he wants to do."
He believes Trump's rhetoric and the uncertainty around his trade policies could also prompt businesses to reconsider future investment.
From a strictly economic point of view, Jeff Steagall, professor of economics and dean of the John Goddard School of Business & Economics at Weber State University, also says the new trade policies are problematic.
"This is the easiest thing in economics and they got it wrong," he said, adding that implementing policies that stymie free trade is always a bad idea.
"A really basic economic analysis says that even if your partners don't trade freely with you, you're better off trading freely with them," Steagall said. "It makes you use your resources the best way you can possibly use your resources."
He said countries that focus on doing what they're best at almost always are successful. Protectionism seldom ever is economically prosperous, he said.4 comments on this story
Locally, Steagall said the policies will negatively impact Utah companies because the Beehive State is not a steel producer.
"There really is no economic upside (to these policies)," Steagall said. "In Utah, there really are no winners from this particular policy — only losers."
Nationally, he noted that the amount American steel companies gain from this tariff compared to the amount that all the consumers of steel are going to pay will not be profitable.
"The losses greatly outweigh the gains," he said. "That's immediate and long-term."