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One Year Later—The Impact of the 2018 Tariffs
by Connor Wilson, Research Manager, Corporate Business Development
In late March 2018, the Trump administration passed new tariffs—25 percent on steel and 10 percent on aluminum—citing threats to national security. One year later, we’re sharing our observations on the impact the steel tariffs have had on our business.
The United States currently imports 30 percent of the steel it uses, relying on domestic manufacturers to supply the remaining 70 percent. As the largest consumer of steel, the construction industry consumed 40 percent of all U.S. manufactured steel product in 2017.
At the end of Q1 2018, domestic steel prices (plate steel in net tons) were already on the rise, climbing 20 percent from January 8th through March 12th due to the strong economy and premature tariff speculation. Prices continued to rise after the tariffs were imposed, in part due to American steel manufacturers ramping up their domestic production while simultaneously capitalizing on the price difference of imported steel (referred to as arbitrage by economists). By December 2018, steel prices had increased 41 percent since the beginning of the year and hit a seven-year high of $1,029 per net ton.
HITT responded to the tariffs proactively, giving team members the necessary tools to address the anticipated challenges. Our Legal and Risk Management team provided standard clarifications and contract language that intended to (at a minimum) create conversation around the risks of tariffs, such as material price escalation and disruption to the supply chain. In collaboration with our Preconstruction team, they also recommended that HITT operations leaders price steel as allowances, purchase in advance, and engage affected trades as early as possible. Our teams also worked closely with our subcontractor partners to lock-in prices and confirm material availability as early as possible on a project.
With uncertainty regarding the lasting impacts of tariffs and potential for complete removal, HITT’s Research department will continue to monitor the ongoing trade conflicts and our Preconstruction team will monitor price volatility and material accessibility.
We encourage you to contact us for more information regarding the status of tariffs, pricing, or legal impacts.