On March 8, 2018, President Trump signed an order to impose a 25% tariff on steel and a 10% tariff on aluminum. It eventually took effect on March 23, 2018.
So, what does this mean for you? To clarify things, it means that prices will rise for cars, cans, and even HVAC equipment. Prices will rise regardless of if companies continue to use imported steel and aluminum or switch to U.S. made material.
What is a Tariff?
A tariff is a tax on imported or exported goods or services, although tariffs on exports can be very rare. Normally, tariffs are imposed to restrict imports from overseas. Usually government’s raise tariff’s to make domestic products more attractive, especially nascent or battered ones.
Usually, when tariffs are raised, the government and manufacturers (in this case, American-made aluminum and steel) benefits at this expense of consumers. Not only does a lack of competition raise prices, but they can also generate tensions and instigate a trade war.
The Air Conditioning Heating, and Refrigeration Institute (AHRI) represents manufacturers of heating, air conditioning, commercial refrigeration, and water heating equipment and products.
In a recent letter to President Trump, AHRI expressed that they did not support the additional tariffs on steel aluminum due to the “severe detrimental impact on downstream users of steel and aluminum.” This was stated in the letter:
“We understand your goal of supporting these two important sectors of our domestic manufacturing base. However, it is our belief that global tariffs and quotas on imports of these products will injure the purchasers of these products and will lead to the loss of thousands of American jobs. Trade restrictions of this nature and magnitude will therefore lead to more downstream steel and aluminum-containing products being imported into the U.S.”
According to the official Presidential Proclamation on adjusting imports of steel into the US, the reason for the tariffs is because of national security. Without this large, domestic supply of aluminum and steel, the United States may not be able to supply itself with military equipment in the event of war.
“Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and smart trade!” President Trump stated in a recent tweet.
While this intention may be to bring back jobs and fulfill campaign promises, the official reason is national security. Regardless of this reasoning, these new tariffs will raise costs for downstream users of aluminum and steel.
People are still debating the effect on the U.S. economy, while these new U.S. tariffs will undeniably raise expenses for U.S. automakers, HVAC manufacturers, infrastructure projects, defense spending, and any other industry that purchases steel and aluminum from different countries.
These tariffs have been supported by U.S. produces of aluminum and steel, who have been complaining about unfair foreign competition and seeking protection from the government for years. Also, the government will benefit by receiving extra taxes of imported goods.
If you are looking to replace your HVAC system, you should consider doing it before the new tariffs make HVAC purchases more expensive.
HVAC purchases are already becoming more expensive. For example, Hercules Industries released a statement recently,
“Since the announcement of a 25 percent tariff on all foreign steel imports, the market has been placed under significant constraints unlike which we have experienced in recent past. All steel manufactured products will inevitably be impacted by this announcement as it rolls into implementation. To navigate such volatile market conditions, we will be implementing a 6 percent increase on all nonmaterial-intensive products and a 12 percent increase on material-intensive products… In the event that steel prices reach levels that reach beyond the increases already announced, we will be forced to implement an additional increase in the near future.”
Consumers and manufacturers will have to wait and see how all of this will play out. There is one thing for sure, interest rates and prices are already rising.
On March 16, the FED raised interest rates by a quarter of a percentage point, from 1.5% to 1.7%. They expect to raise rates two or three times more this year. These new tariffs can increase the interest rate even faster. When tariffs increase prices for customers, the Federal Reserve can see inflation rising and react by raising interest rates faster.
Start thinking about pulling the trigger on any planned purchases that involve large amounts of steel or aluminum, to avoid the higher cost that may be associated with the tariffs.
Thinking about an upgrade or replacement system? Contact Pickerington Heating & Cooling by phone at (614) 837-4026 to get a quote on a new furnace and air conditioner for your home. Or use our convenient Instant Online Quote tool to determine if now is the time to upgrade.