Nearly six months after President Donald Trump announced a 25 percent tariff on steel and a 10 percent tariff on aluminum imports, the long-term effects have yet to become clear, but uncertainty in the short-term has led to market fluctuations that ripple across the economy.
“The uncertainty really seems to be the key piece,” said Tucson Metro Chamber President and CEO Amber Smith. “That uncertainty alone will drive up the costs and halt projects, which has a whole other consequence.”
Though most businesses that don’t deal directly with industrial metals haven’t seen much change, Smith said development projects have become more difficult as the timeline for project bids has decreased because no one knows how prices will settle in the future.
As prices increase for imported steel and aluminum due to the tariffs, domestic metal mills have increased their prices for industrial metals, said Roger Cundick, general manager for the Tucson and Phoenix stores of Industrial Metal Supply based in California.
Cundick said metal mills have raised their prices somewhere in the ballpark of 10 to 20 percent, but the market has been the best he’s seen it in more than 20 years of selling metal.
“People have not been very happy—not been receptive to it,” he said. “But business is still good. Everybody’s pretty busy right now.”
Some of Industrial Metal Supply’s biggest customers are defense contractors, such as Raytheon and Boeing.
Raytheon CEO Thomas Kennedy told CNBC News that the tariffs don’t really affect them, as most of their steel and aluminum comes from domestic producers anyway. If business does take a turn for the worst, Kennedy is confident that foreign markets will sustain them.
Despite increased costs, Cundick said metal distributors have shifted their purchases from imports to domestic products.
“The import stuff kind of kept everyone in line,” he said.
But without the competition of cheaper metals abroad, domestic mills have less incentive to keep prices low.
Cundick said his customers with businesses that have to plan ahead, such as machine shops or fabricators that release yearly or quarterly catalogues at set prices, stand to get the worst of the deal.
He said if those companies don’t raise their prices to adjust to the new prices for raw materials, they may have to make labor cuts, but won’t necessarily shut down.
For his part, Cundick said he hopes the tariffs have the effect the President intends them to have.
Carlos Ruiz, owner and operator of HT Metals in Tucson, has had a different experience. HT Metals sells mostly to small-to-mid-sized machine shops, a smaller market than Industrial Metal Supply.
Ruiz said many of his customer stocked up immediately following the tariff announcements in anticipation of increased costs, and now the market has slowed down.
“I think there’s a month here where things are kind of being digested,” he said. “I think it’ll get better, it’s just this weird five months.”
One problem Ruiz has run into is a shortage of specialty aluminum cuts. A combination of long production periods and the rush to buy metal at a cheaper price have led to a lag in some supply chains.
“It’s not like bread where you can say ‘Oh we’ll just make bread the next day,’ It doesn’t replenish that quickly,” he said.
Demand for those products hasn’t changed, though, Ruiz said. Though his business has grown over the last several years, and Ruiz is dealing with new scales of business, he said he’s never seen a period in which the market has hit this kind of shortage.
The other end of President Trump’s trade maneuvering reveals itself in the form of retaliatory tariffs.
In July, China imposed tariffs on $34 billion worth of U.S. imports in response to the President’s tariffs. Some of those tariffs target agricultural products produced in the U.S.
Dick Walden owns and manages Green Valley Pecan Company. He said China raised its duty on U.S. Pecans from 7 percent to 47 percent in response to Trump’s tariffs.
Walden said China buys between 15 and 18 percent of the U.S. production of pecans, used for cereals and snacks. Green Valley Pecan Company makes up about 8 to 10 percent of the national production.
“Agriculture is not recognized for the economic engine that it is in our total nationwide economy,” he said.
Like many other sectors, Walden said the total effects of the tariffs have yet to be seen, but he said pecan prices will probably be 15 to 18 percent cheaper than last year due to the decrease in demand.
“We just have to wait and see what happens,” he said. “There’s just a lot of moving parts and a lot of unknowns brought out by the antics of this administration.”
Walden’s major concerns focus on the global market. He worries that the tariffs may have such a negative effect on China that the rest of the world experiences a downturn as well.
“Pecans, as all tree nuts, is a world market,” he said. “If there’s a change in demand someplace, it effects the entire pricing structure for the whole world.”
Walden has raised his concerns of low prices with the National Pecan Sellers Association and National Pecan Federation responsible for lobbying at the federal level.
Smith said the Tucson Metro Chamber lobbies at the federal level, but hasn’t taken a stance on the tariffs. She said none of their members have raised concerns, but they’ll act if prompted.
“We will react whenever our members reach out to us,” she said.
She said most of the information they’ve received about the effects is secondhand, and that they haven’t heard directly from members.
While many businesses may be riding the economic boon of the last couple years, uncertainty and anticipation has some taking a wait-and-see strategy to future decisions.
“It’s nice that the accelerator was going with tax cuts and deregulation,” Ruiz said. “I’m just not a fan of how the whole tariff thing went down.”
Nick Meyers is a Tucson Local Media freelance reporter.