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Steel tariff effect on Ag equipment prices

J

jacks

Member
I sell specialized AG equipment produced by a short line manufacturer. It is a steel intensive product. I just received notice of a 15% price increase across all the product lines. I do have to say that I am shocked and did not see such a large increase coming so quickly. This comes a couple of weeks after the US announced that Mexico and Canada would be subject to the 25% steel export tariffs. I do not want to start a political discussion, but am interested in any price increase that others are seeing in finished product ag equipment. Also, what effect will a prolonged trade war have on the AG equipment industry and farmers?
 
Especially since the tariffs haven't been imposed yet,your supplier is ripping you off.Of course I guess you have never had a price increase before either right? New Holland is way ahead of your guy they've been jacking the prices on hay equipment and parts for the last 10 years real good.
 
I talked to a salesman friend at my old workplace yesterday and he said they were charging surcharges on existing quoted prices and published prices. Did not say how much. Steel is just one part of the machine's component. This is ag equipment. Leo
 
Evidently the tariffs became effective May 31.

nnalert hits allies with metal tariffs; Mexico, EU and Canada vow to retaliate

By Jeremy Diamond and Julia Horowitz May 31, 2018: 11:31 PM ET

President nnalert is imposing steep tariffs on steel and aluminum from three of America's biggest trading partners ? Canada, Mexico and the European Union.

The trade penalties, 25% on imported steel and 10% on imported aluminum, take effect at midnight, Commerce Secretary Wilbur Ross told reporters Thursday.

Mexico, the EU and Canada immediately announced plans to retaliate with their own tariffs against American products.

nnalert announced worldwide steel and aluminum tariffs in March but granted exemptions to some major trading partners.

Canada, Mexico and the EU were among the countries granted relief while the United States pursued negotiations to address the administration's concerns about the state of domestic steel and aluminum production. Those negotiations had a Friday deadline.

Related: The global steel industry by the numbers

nnalert's decision could raise prices for Americans on a range of everyday products. It could also place the United States in a trade dispute on more than one front. The administration is separately moving ahead with tariffs on Chinese goods.

nnalert imposed the steel and aluminum penalties under a 1962 law that gives the president broad power to increase or reduce tariffs on goods deemed critical to national security.

"We take the view that without a strong economy, you cannot have strong national security," Ross told reporters.






May 31
 
Apparently some do not understand the supply chain. You either have to pay up front for delivery later, or have the money in hand to pay for the item when it is delivered. Either way the price goes up BEFORE, where they might gouge is when raw material prices fall. There are no huge piles of goods sitting someplace waiting around just in case somebody might want it.
 
I will be increasing the price of my existing inventory by 15%. I do not feel that this is gouging, because after I sell those units they must be replaced by units costing 15% more. The bottom line in my understanding is that the cost of tariffs will be passed along by retailers and dealers to the end purchaser. In effect a tariff is a tax on certain products levied on the end purchaser. If I receive notice of a 15% price decrease, I will immediately reduce my prices by the same amount, because inventory replacement cost has decreased by that amount.
 
Then again they should have been using US made steel in the first place,everyone claims they hate foreign products but don't want to ante up a few extra Dollars$ to get US made and to help US workers.Guess you buy your tools at Harbor Freight instead of Snap-on too?(LOL)
 
I wasn't referring to you, you are doing what I was trying to explain, that money has to be in hand before NEW product comes in.
 
Have you noticed the price of oil lately? Have you noticed the expanding economy? Supply and demand dictates the final price of any good or service. If you want to blame the President then just do it up front, sneaky cheap shots are not an effective argument.
 
I work at a production machine shop, probably 90% of our product is steel or iron.

I saw a notice of across the line 25% increase from one of our suppliers months ago.

That was at the first mention of the tariff, long before it went into effect.
 
The price of steel that I get to help ag students build trailers went up 5%in april. They told me to expect more. The price of trailer parts [axles,wheels,etc] went up 10% may 1 at my supplier . One parts store I deal with sells a lot of lawn mower parts. They said their blade supplier was going up 100%! They have a large inventory and wont go up until they have to buy new stock. Good people !
 
What we do know is that if the other guy had done it between 2009 and 2017 you would have been against it. For some it is not the rationality of any act, but just our side versus their side. We are good, they are bad. Team sports.
 
The point of a import tariff is to make the American product competitive.
The product from Canada cost $1.00 and the US made product cost $1.25.
So you add a $.25 tariff to the Canada product to make them cost the same.

They do it with sugar every day.
Every ounce of sugar coming into the USA has a import tariff on it to make our sugar farmers competitive.
The way they keep it in check is with quotas on American grown sugar.

The problem with steel is it is to little to late.
It is not like you can go and open a new steel mill tomorrow to meet the steel demand in this country.
So we will have no choice but to keep importing steel and paying the higher price.

I am all for paying a little more if it puts Americans to work but I do not see that happening.
So essentially this tariff is a hidden tax.

This may be the demise of the present boom in the economy if this is long term and not a short term chess move to get someone to do something they would not unless pushed to do it.
 
About 20 years ago an American President said America was going to become the "information economy of the world" . Well we did that fairly well and that part of our population has fared pretty good. What he did not mention (or undertand?) was that 25% of our population could barely read, and did not want to learn how to do "Information". So when those routine repetitive jobs in 65,000 factories went away, the jobs were gone, but the people...millions and millions were still here...and to a large extent unemployable at a wage rate even close to what they thought they were worth.

So now we have a tariff plan to bring the factories back. I just hope someone has thought through the unexpected consequences of this plan, better than the guys that designed the prior plan.
 
The 25% tariff on Canadian and Mexican steel took effect at midnight May 31. However, because of the expectation of tariffs and good demand, steel commodity prices have risen sharply in 2018. Ag commodity markets work the same way. All markets are future discounting, that is today's price and futures prices reflect current and probable future factors and conditions.
 
I have lost track of how many people have gone back to work at the Granite City steel mill.I think they are on their third furnace start up in six months.
 
Can someone tell me for fact if the tariff is for raw material (sheet stock) coils etc only. Or does it include fabricated and all assembled metal parts?

Why do you think US steel manufactures can't compete? Don't we hear it's due to taxation, EPA and labor? Could it be outdated plants? My gut says the money accrued by this tariff will be squandered.
 
Steel and aluminum prices have been rising since people started keeping track of the prices of steel and aluminum. Will the price go up higher if the tariff goes into place? Of course it will. But right now the prices of these commodities are going up because the sellers have an excuse to raise the prices, just like the price of crude oil jumps up if some little podunk little oil refinery on the other side of the world has a fire.
I don't have a dog in this fight, but a local manufacturer makes forklifts, a lot of them for export. When asked about how the proposed tariffs on steel would affect his company, the owner of this company stated that a lot of other countries have tariffs on the finished forklifts that go INTO their country. One example is a supposedly good friend of our country, Great Britain, who puts a 15% tariff on every forklift that they purchase.
Will a tariff make our prices go up? Probably. But we have to have a two-way street on the products that we purchase and manufacture.
In other words, I think everybody on this site will agree that everything should be equal when buying and selling products from other countries.
 
A number of years ago, the price of fertilizers doubled. Since I had actually prepurchased fertilizer 1 year in advance, I did NOT raise the price of my hay to my regular customers. Big mistake. One lady got divorced and moved. Several others sold off their older livestock. Not because hay cost more but because feed and everything else went up. I lost business. Next time I jack the price along with the full economy. Lesson learnt the hard way. Being a good guy hurt me directly.
 
Finally, we have a president trying to do something about the US being the world's financial dumping ground.
 
Well, the whole point of the tariffs is to raise the domestic price of aluminum and steel! So it would be much more surprising if raw material prices DID NOT go up in anticipation of the tariffs. Now as for finished products, most of the major OEMs have long-term contracts with their suppliers, so they may squeeze the suppliers for a little while and hold their prices down. Or maybe they have hedged on metal futures, giving them a little windfall to offset increased material costs. But sooner or later any manufacturer whose products use a lot of steel and aluminum will be forced to raise its prices.
 
Most likely the tariffs are temporary as its being used by the USA to make other countries we trade with lower their tariffs on our products coming into their countries to the same level as we have have on their products coming into our country.President offered to abolish all tariffs between all of our trading partners if they'd do the same of course they don't want to do that because they have been able to have an unfair advantage for years.No tariffs would mean actual Free Trade not what we have now.
 
One thing hasn't been mentioned. If a foreign company, specifically a 3rd world country is new in a particular industry and they impose a tariff on that good coming into their country it will hurt us for the short term, but in the long term their success and improved citizen wealth can create a real demand for our manufactured goods and technology. Even Canada, Great Britain and Mexico benefit by imposing a tariff on our goods but this can make them a wealthier nation and therefore have more money to spend on our other goods. We can't just look at the present but have to be future minded as well.
 
Nice theory but its not the way its worked out in the real World,trade deficits have been getting bigger with the US on the loosing end of the deal.USA has been a sucker long enough
in International trade.NAFTA was the dumbest trade deal ever from the USA point of view.
 
Has anyone else noticed that most of the new factories in America are owned by foreign companies? China is even buying up long term American manufacturing like the GE Appliance division. Lots of Americans now rely on foreign employers for a job.
I recently read the following letter to the editor in a magazine. Although I am not in agreement with everything or viewpoint in this article,it does raise interesting issues and viewpoints to consider. Sorry, I misplaced the authors name.

Quote "Welcome to the future. Bad government policies over the last several decades have created a middle class in China, leaving middle America financially gutted. They (China) will now dominate the world as they buy up assets and we will be come a servant economy. The business of China is business. The business of the USA is war. As they move their wealth out of China they will buy up controlling interest in just about everything. While we (America) continue to squander our remaining capital on policing the world. We (America) will continue to borrow more to buy the cheap stuff they manufacture, and they will use that money to buy our businesses. We will become service personnel to our Chinese overlords."
 
Does steel even make up 30% of the price of the product? I remember a few years ago is was made public that the cost of providing health care to retired auto workers was greater than the cost of steel when computing what a new car cost.


So a $100,000 piece of equipment - even if the raw steel makes up 30% of the price (extremely doubtful $30,000) the tariff increase is $7,500 - or a 7.5%.
 
Foreign companies aren't necessarily anymore owned by foreigners than American companies are owned by Americans if they are not a private company.The shareholders can live anywhere and can change with the next stock buy/sell.Where they have their factories and employee people is the most important thing to the vast majority of working people.An American company like Ford that has factories in Mexico and ships cars back to the US to sell isn't helping the US middle class,Toyota builds factories in the USA and hires Americans helps the US overall.
 
Triple Hay, you don't know anything about me, the same as I don't know anything about you, I thought you were more intelligent than that.
 
(quoted from post at 05:45:29 06/11/18) Has anyone else noticed that most of the new factories in America are owned by foreign companies? China is even buying up long term American manufacturing like the GE Appliance division. Lots of Americans now rely on foreign employers for a job.
I recently read the following letter to the editor in a magazine. Although I am not in agreement with everything or viewpoint in this article,it does raise interesting issues and viewpoints to consider. Sorry, I misplaced the authors name.

Quote "Welcome to the future. Bad government policies over the last several decades have created a middle class in China, leaving middle America financially gutted. They (China) will now dominate the world as they buy up assets and we will be come a servant economy. The business of China is business. The business of the USA is war. As they move their wealth out of China they will buy up controlling interest in just about everything. While we (America) continue to squander our remaining capital on policing the world. We (America) will continue to borrow more to buy the cheap stuff they manufacture, and they will use that money to buy our businesses. We will become service personnel to our Chinese overlords."
Click to expand...

They were saying the same thing about Japan in the '80s. Didn't happen then. Not going to happen now. These things always seem to even themselves out, because no business model is sustainable in the long term.
 
Lots of interesting takes on what is happening in the global economy. While we here in North America and Western Europe blame other countries for what has happened with manufacturing at home, the real reason things have gone south for us (or east or west) is our demand for a lifestyle where we continually expect our generation to be better off than the previous one, even if it means going into debt which might never get paid off. It's hard to sustain an economy where dime-a-dozen workers are getting $30 per hour when someone else somewhere else will do the same thing for 1/5 the wage. The manufacturing companies made those decisions to move elsewhere many years ago, but really, they didn't have a whole lot of choice. Just my two cents on the subject ......
 
Does steel even make up 30% of the price of the product? ......

So a $100,000 piece of equipment - even if the raw steel makes up 30% of the price (extremely doubtful $30,000) the tariff increase is $7,500 - or a 7.5%.
Click to expand...

Not in my experience. In my ~40 years of manufacturing experience we typically figured out that materials accounted for only about 20% of the cost of a finished product most of the time.
 
(quoted from post at 09:37:50 06/11/18)
Does steel even make up 30% of the price of the product? ......

So a $100,000 piece of equipment - even if the raw steel makes up 30% of the price (extremely doubtful $30,000) the tariff increase is $7,500 - or a 7.5%.
Click to expand...

Not in my experience. In my ~40 years of manufacturing experience we typically figured out that materials accounted for only about 20% of the cost of a finished product most of the time.
Click to expand...



The 30% was a very high end number. So $20,000 in steel with the 25% tariff is an increase of $5,000 or 5%. In these case the equipment manufacturer used a 5% increase in cost to triple it into a 15% increase in price. Wish I could do that.
 
(quoted from post at 09:37:50 06/11/18)
Does steel even make up 30% of the price of the product? ......

So a $100,000 piece of equipment - even if the raw steel makes up 30% of the price (extremely doubtful $30,000) the tariff increase is $7,500 - or a 7.5%.
Click to expand...

Not in my experience. In my ~40 years of manufacturing experience we typically figured out that materials accounted for only about 20% of the cost of a finished product most of the time.
Click to expand...



The 30% was a very high end number. So $20,000 in steel with the 25% tariff is an increase of $5,000 or 5%. In these case the equipment manufacturer used a 5% increase in cost to triple it into a 15% increase in price. Wish I could do that.
 
....The 30% was a very high end number. So $20,000 in steel with the 25% tariff is an increase of $5,000 or 5%. In these case the equipment manufacturer used a 5% increase in cost to triple it into a 15% increase in price. Wish I could do that.
Click to expand...

While 15% is too much, keep in mind that when costs go up for the materials used in a manufactured part there are also cost increases within the manufacturing process that end up being passed along too.

Things like drill bits used in the machines get more expensive. The machines themselves get more expensive. Tooling and fixtures get more expensive. At the end of it all often labor costs go up as workers get cost of living increases.

The Tariff thing is a pretty wide reaching monster when one looks at it in depth.
 
The reason it doesn't work out in the real world is because government gets involved. There are always unintended consequences when government tries to equalize and make everything fair. His tariff plan will never work as intended.
 
Billy Jeff knew a large percentage of the population was functionally illiterate, the policies of his party are designed to ensure they remain stupid, otherwise there would not be enough dummies to vote for socialism and the donkeys would be out of power.
 
Was kinda funny but 15 year or so ago here they raised property taxes to pay for a new school. Now that tax levy was voted on before it went into effect. People who are renters were bragging that they voted for the tax increase because they were not going to have to pay for it. Now when it passed the tax rate wasn't going up until the following year. The tenants? They were notified within days of the vote that due to property tax increases that rent was going up the next month! Then they were crying big time "I didn't think we were going to have to pay for it".

Well this is kinda the same thing. Any time a business has an increase in the cost of doing business they right away pass it onto the customer. Can be materials, utilities or labor. The customer always pays. Now who wants them to raise the federal minimum wage over 100% to 15 an hour? Knowing that the business are going to pass that cost onto us?

Rick
 
What everyone misses, and the current resident of the White House never seems to have learned, is that you can't really use tariffs to accomplish anything anymore. They are an obsolete 16th and 17th-century concept that last really was workable in the early 20th century.

The problem in the 21st century is that so much trade is international that whatever we do to them, they can do to us. So you cannot win.

There is also the fact that it's not "them" that pays the tariff. I honestly believe that the president doesn't understand this. Tariffs are paid by OUR companies, not by the Chinese. So by implementing tariffs, you are just bleeding our own companies.

So we just put tariffs on steel and aluminum. And across the world, other countries just slapped tariffs on our agricultural products, tech products, and other goods that we make here. So how did we win? We didn't. No one does.

You cannot tariff your way to success in the 21st century. The world has changed, we can argue if it's for the better or not, but you can't argue that the world works differently now than it did back when tariffs actually were a workable way to protect a domestic industry.

Grouse
 
You need to read up on the subject because you obviously do not understand what a tariff actually is or the reasons for implementing tariffs.
 
If tariffs don't work then why are so many of the countries the USA trades with imposing such high tariffs on our products? The President offered to do away with all tariffs we impose if
the countries we trade with will do the same, its their move go preach to them.
 
Did you ever think nnalert is using new tariffs as a leverage point? Sometimes you have to do something drastic to get attention! Did you realize that Canada has a 230% tariff on our dairy products going up there. I see loads of Pork coming down out of Canada for slaughter. Don't sound fair to me. Also one more example is Germany. They have a very high tariff on US made cars going over there. United States has a much lower tariff on Germany cars coming over here.

Now just think about it. If you were other countries and nnalert was trying to even things out wouldn't you be unhappy .Tariffs are workable but they need to be fair
 
nnalert would like to restore the steel industry in this country but why? There are a lot more consumers that will be hurt here by higher prices than the ones it will help. But he is a populist and that is what they do. I hope it works but I doubt he has thought it through. How many of you really believe government is the answer to all of our economic woes, or for that manner any of our problems? We can fight wars but we are never prepared when they come, again lack of long term thinking.
 
On hogs, we have had free trade between our countries long enough to trim the packing industry of all but the most cost efficient plants. Only the plants in lower tax, labour and energy cost areas survived. Therefore Canadian hogs get slaughtered in US plants because we don't have much processing capacity anymore. US plants expanded to take our hogs while Canadian plants closed.
 
(quoted from post at 20:34:20 06/11/18) What everyone misses, and the current resident of the White House never seems to have learned, is that you can't really use tariffs to accomplish anything anymore. They are an obsolete 16th and 17th-century concept that last really was workable in the early 20th century.

The problem in the 21st century is that so much trade is international that whatever we do to them, they can do to us. So you cannot win.

There is also the fact that it's not "them" that pays the tariff. I honestly believe that the president doesn't understand this. Tariffs are paid by OUR companies, not by the Chinese. So by implementing tariffs, you are just bleeding our own companies.

So we just put tariffs on steel and aluminum. And across the world, other countries just slapped tariffs on our agricultural products, tech products, and other goods that we make here. So how did we win? We didn't. No one does.

You cannot tariff your way to success in the 21st century. The world has changed, we can argue if it's for the better or not, but you can't argue that the world works differently now than it did back when tariffs actually were a workable way to protect a domestic industry.

Grouse
Click to expand...

From what I understand the current administration is saying that they want to impose the same tariffs some of our trading partners are charging us. He's OK with buying steel from China as long as China doesn't impose higher percentage tariffs against
US good. But if China charges a 25% tariff so will we. That truly levels the playing field.

What most people who would like to impose protectionist trade policies don't know is that the Great Depression was brought on by just those policies. When we refused to buy goods from overseas they refused to buy our goods. That lead directly to the Wall Street crash of 1929.

Rick
 
Limited short term thinking again! Years ago no one thought we would buy autos, tractors and many other products from foreign countries and we had the markets tied up. That thinking helped to make Detroit the city of shame it is today. Ours and everyone else economy is world-wide and so interrelated that there is no single country economy anymore. Yet, we still try to solve problems with the same failed tactics of the past such as protectionism. Never worked before other than just helped a few isolated segments for the short term so why do we think it will work this time.
 
Do we buy steel armor and Chobham armor from overseas or do we restrict purchases to domestic manufactures?

Are we building new tanks again? I thought the Detroit Arsenal plant closed in the 1990's.
 
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