When President Donald Trump announced that the United States would impose a 25 percent tariff on imported steel and a 10 percent tax on imported aluminum, U.S. steel and aluminum producers rejoiced.
“Evraz North America supports the Trump administration’s efforts to stop unfair and illegal imports of dumped and subsidized steel into the U.S.,” the company said in a statement issued March 8. “These imports hurt the domestic industry and cost hundreds of jobs.”
Evraz North America, the largest producer of rail on the continent, operates Evraz Rocky Mountain Steel in Pueblo and mills in Portland, Ore., and Canada.
Although the tariffs stand to benefit steel and aluminum producers, some economists say the tariffs could hurt businesses that use steel and aluminum in products ranging from beer and soda cans to auto parts, washing machines and heavy machinery, and single-family homes to apartment buildings.
A study released March 5 by the Trade Partnership, a Washington, D.C., economic consulting firm, estimated that 28,000 jobs could be lost in the construction industry as a consequence of the tariffs.
Iron and steel and aluminum producers could add more than 33,000 jobs, but more than 179,000 jobs could be lost throughout the rest of the economy, a net loss of nearly 146,000 jobs, the report said. More than five jobs would be lost for every one gained.
Two-thirds of the jobs lost would be those of low-skilled employees, such as production workers, machine operators and office workers.
Evraz’s Pueblo plant makes rail, wire rod and large-diameter pipe used in the oil industry.
“It’s pretty clear that the Pueblo plant would stand to benefit, and the Pueblo economy to some extent as well,” said Dr. Kevin Duncan, a professor of economics at Colorado State University-Pueblo.
Duncan said import information from the U.S. Census Bureau shows that the amount of steel rail imported into the United States is relatively small compared with imports of large-diameter pipe, which constitute about 13 percent of total steel imports.
“These data suggest that the tariffs probably aren’t going to help rail production as much as pipe production,” Duncan said.
Companies that make products that work with railroad ties may benefit marginally, Duncan said.
“There is a rail industry cluster in Pueblo,” he said. “Rocla Concrete Tie has a facility here. Maybe Evraz will do a little more business in ties.”
However, costs will go up for the oil industry.
“My guess is that they’ll say they’re going to have to alter their plans for pipeline construction,” Duncan said.
In addition, “Evraz’s gain would be balanced by losses to Vestas and the aerospace industry,” he said. “Vestas manufactures towers used in wind power generation that are made of plate steel. Pueblo is also home to some aerospace firms that would likely experience higher costs from tariffs on steel and aluminum.”
Dr. Jeronimo Carballo, an assistant professor of economics at the University of Colorado at Boulder, said the tariffs will help steel and aluminum producers export their products and compete in the domestic market, but downstream industries will have to pay higher prices.
“Another way of thinking about this is what’s going to happen in the future,” Carballo said. “It could hurt Colorado exporters, because if other countries decide to retaliate, they may choose products important for production here and put tariffs on them. We don’t know the details of the tariff implementation, so it’s hard to predict changes.”
Construction companies contacted by the Business Journal were reluctant to speculate about how the tariffs will affect them, but owners of two El Paso County breweries that use substantial numbers of aluminum cans are watching warily.
“Anything that could potentially increase my costs, I’m concerned about,” said Chris Wright, founder of Pikes Peak Brewing Co. in Monument. “The president’s done a lot of good things for small businesses this past year, but this is probably not one of them.”
The tax package passed by Congress that went into effect in January included a provision that lowers excise beer taxes for small breweries.
“For 90 percent of the brewers in Colorado who produce under 60,000 barrels, it will reduce the tax from $7 to $3.50 per barrel,” Wright said. “I did 4,500 barrels last year, so it would be a pretty good savings. That’s great, but if aluminum can prices go up as they predict, it could erase almost all those tax savings.”
Wright said he has not yet heard from his suppliers about possible price increases, but has read that the cost of a 9-cent can could go up as much as a penny.
“We’ll package over a million cans this year, so it could be an extra $10,000,” Wright said. “The excise tax reduction would save me $14,000 to $15,000, so almost all of it would be given back.”
Wright said he does not know if he will pass on the extra cost to consumers.
“We will have to see what the market does,” he said. “It could be impactful for the consumer.”
Todd Baldwin, CEO and owner of Red Leg Brewing Co. in Colorado Springs, said his brewery uses 200,000 aluminum cans a year and partners with Pikes Peak Brewing when ordering from a supplier in Wyoming.
“We’re holding our breath to see what they come up with,” Baldwin said.
The brewery uses cans rather than bottles because they’re cheaper, don’t weigh as much and are better for the beer, Baldwin said. Retooling production to use bottles is not an option because of the huge investment in the canning machines.
“There have been a lot of changes to our industry, for example, impacts from the minimum wage and rising hop costs,” he said. “Everything seems to be going up a little bit across the board. We don’t like to make price changes wherever possible, but we’re definitely keeping a close eye on it.” n CSBJ