Steel Tariffs Hit Home for Makers of Construction Equipment
The impact of steel tariffs on construction costs has been widely reported in recent months. Now, an IHS Markit study puts the spotlight on a related industry that is already feeling a financial pinch: manufacturers of heavy equipment, including the bulldozers used at construction sites on a daily basis.
Although manufacturers such as Caterpillar Inc. and Alamo Group are continuing to add jobs, the IHS Markit study predicts that tariffs will increase the cost of producing off-road equipment in the U.S. between 6% and 7% over the next decade, according to a Reuters story posted in advance of the study’s release. This will take its toll on hiring in the sector over the long term.
The study notes that heavy equipment makers are particularly exposed to higher steel prices. Accounting for all steel used, including both directly by these manufacturers and the parts they buy from others, the material represents 18.5% of the cost of a farm machine and 25.8% percent for mining machines.
“If you’re a domestic producer, you’re caught between eating a cost increase or raising prices and potentially losing business,” IHS Markit’s Scott Hazleton told Reuters.
Following publication of the Reuters story, the Association of Equipment Manufacturers, which commissioned the IHS Markit report, posted highlights of the study to its website. Among the report’s findings:
• Placing tariffs on about $265 billion of imports will hurt the U.S. economy, largely from the direct effect of higher prices, yielding average lost GDP of $29 billion a year for 10 years, or $290 billion over the period.
• The effect on employment is negative; the tariffs will suppress domestic job gains by 260,000 over 10 years.
• Consumers will pay higher prices and reduce their real spending by $23 billion per year over the next decade.
• Total loss in employment related to diminished output of all off-highway equipment is projected to end the forecast period with a loss of 20,700 jobs.
AEM says that “while the Trump administration needs to continue to address competitive trade issues with countries like China—including dealing with weak intellectual property protections, restrictions on foreign investment, and policies that limit competition—tariffs are clearly harming U.S. workers, farmers and their families.”
For comments, questions or concerns, please contact Paul Bubny
- ◦Economy
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