Steel and Aluminum tarrifs

[mayal7]

Not sure if this issue has been discussed before, but I'm curious to know if any of you have an idea how the recent steel and aluminum import tariffs will/are going to affect the USA bike building community. Both builders and consumers.

[David Kirk]

We will all pay more.

dave

[Jaybee]

I'm sure that we can handle this peacefully the third time around.

[GregL]

Per previous threads, major bike manufacturers have already raised prices to cover anticipated higher costs of raw materials. In my industry (defense electronics), we're already seeing higher prices for steel and aluminum mechanical parts. We'll be passing this on to our customers (US and friendly foreign nations) who will ultimately pass it on to their citizens through higher taxes or lower standards of service. This is NOT a political statement, simply an economic fact.

Greg

[mayal7]

Not my intention to make it political, but rather just to get a better understanding of the impact that this is going to have on the industry, both for builders and consumers. When is this going to be reflected in the prices? On average, how much will prices increase? Will this encourage the production/use of USA made tubing?


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[Ozz]

.... Will this encourage the production/use of USA made tubing?


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No.

High start up costs and the temporary nature of tariffs make an investment in domestic tubing production unlikely....

The current tariffs and threat of more is most likely a negotiating tactic for getting better agreements in place regarding intellectual property and the like....whether it works depends on who is most able /willing to absorb the pain of tariffs....

One advantage China has, is that their leaders don't need to worry about getting re-elected...

IMHO.....

[GregL]

Not my intention to make it political, but rather just to get a better understanding of the impact that this is going to have on the industry, both for builders and consumers. When is this going to be reflected in the prices? On average, how much will prices increase? Will this encourage the production/use of USA made tubing?
If you haven't already done so, I respectfully suggest you read the previous threads on this subject. They were very informative before they devolved.

https://forums.thepaceline.net/showthread.php?t=227976&highlight=tariff

https://forums.thepaceline.net/showthread.php?t=228387&highlight=tariff

https://forums.thepaceline.net/showthread.php?t=225892&highlight=tariff

Greg

[bigbill]

I work in the cabinet industry and we get some wood products and hardware from China. Each was affected by tariffs but the Chinese suppliers are lowering their wholesale costs to counter the tariffs and keep the prices essentially the same. They want the business and seem willing to flex a little to keep product flowing. Once agreements are reached and the tariffs are eliminated or reduced, I'm curious if the suppliers will raise their prices.

[yinzerniner]

I work in the cabinet industry and we get some wood products and hardware from China. Each was affected by tariffs but the Chinese suppliers are lowering their wholesale costs to counter the tariffs and keep the prices essentially the same. They want the business and seem willing to flex a little to keep product flowing. Once agreements are reached and the tariffs are eliminated or reduced, I'm curious if the suppliers will raise their prices.

I work in the architectural design and build industry and we're seeing costs for full-built products like cabinets, toilets, baths, hardware, etc slightly raised but bare materials costs are going WAY up, like 30-40%.

I think a huge reason for the discrepancy is how tariffs themselves are charged, each base material is given a tariff rate as opposed to the actual value of the finished product. So a cabinet maker in China can say that instead of the labor being X and the base materials Y which total 100, they can make the labor X+30, the materials Y-30, and thus the tariffs on the materials is much less but the total purchase price stays the same with them taking a lower hit.

Dealing with this issue right now as quartz and stone from China for countertops are getting killed, as they have to ship to the US as base materials and the milling / shaping / sizing done on a project by project basis.

[bward1028]

White Industries is adding a 4% tariff surcharge to all orders now.

https://theradavist.com/2018/10/white-industries-adds-a-tariff-surchage/

[Mark McM]

No.

High start up costs and the temporary nature of tariffs make an investment in domestic tubing production unlikely....

But will the tariffs help already established domestic frame tubing manufacturers like Vari-Wall (https://shop.vari-wall.com/) and KVA (http://www.kvastainless.com/bicycles/)?

[yinzerniner]

But will the tariffs help already established domestic frame tubing manufacturers like Vari-Wall (https://shop.vari-wall.com/) and KVA (http://www.kvastainless.com/bicycles/)?

From a comment on a post from Radavist, yes it will.
"In North America, aluminum is bought and sold with a "Midwest Transaction Premium" that is a market-driven adder on top of the London Metal Exchange (LME) price of raw aluminum.

Because we can't possibly supply all of our domestic aluminum needs with domestic manufacturers, metal flows into the country from multiple non-US sources as prime, scrap, etc. The Midwest Premium has crept upwards for several months in anticipation of the tariffs until it effectively had the 10% tariff baked-in plus some extra to cover those various sources since it's not really possible to have sliding scale prices to cover the myriad of material sources on any given day.

Domestic suppliers sell their product at the market price and (kind of) take a theoretical windfall, but their prices are artificially inflated. Importers of foreign material pay the tariff at the border. At the end of the day, the US government bags the tariff fees and ultimately the domestic downstream manufacturers and consumers end up footing the bill.

Oh and don't forget that in some scenarios, Canadian or Mexican manufacturers are purchasing their metal at the elevated MWP and then selling into the US market with the tariff applied at the border, so effectively a "double dip"...

And that's just metal. All the Section 301 tariffs on Chinese products are really pinching the industry."
https://theradavist.com/2018/10/white-industries-adds-a-tariff-surchage/

Basically, yes it affects the other tubing manufacturers since the overall price of all base materials have gone up, not just base materials being imported from China.

[Ozz]

But will the tariffs help already established domestic frame tubing manufacturers like Vari-Wall (https://shop.vari-wall.com/) and KVA (http://www.kvastainless.com/bicycles/)?

Sure, but do they want to increase capacity (and added cost of doing so) for something that is probably temporary? Sucks to hire more people and buy machines to just have to layoff / sell them a couple years later.

In the short term, it lets them raise prices cuz the competition is is more expensive

[brewsmith]

I sell commercial brewing equipment for a living, and there is no doubt that it is going to have a sweeping effect in a ton of different industries. We've already seen the price of blank aluminum cans go up, and two of the last American keg manufactures have had to shutter their doors because they could no longer compete when the price of their (Chinese) raw material went up 25%. The only alternative for them would have been to use American steel which is at least 40% more and would only price them out of the market further.

The tarriffs we pay on a container went from about $3k to $17k overnight last month and that goes up even further on Jan 1. We've already had to increase prices, and the cost of raw materials and now finished goods going up is only going to trickle down to the consumer even further. The other problem is with supply. While it is well and good to support American forges and factories, there is a true limit to what they can produce vs the overall demand and there is no way those industries would be able to scale large enough and fast enough to fill that vacuum (as Ozz alludes to above).

Politics aside, it's a sticky situation for sure....

[MikeD]

I sell commercial brewing equipment for a living, and there is no doubt that it is going to have a sweeping effect in a ton of different industries. We've already seen the price of blank aluminum cans go up, and two of the last American keg manufactures have had to shutter their doors because they could no longer compete when the price of their (Chinese) raw material went up 25%. The only alternative for them would have been to use American steel which is at least 40% more and would only price them out of the market further.

The tarriffs we pay on a container went from about $3k to $17k overnight last month and that goes up even further on Jan 1. We've already had to increase prices, and the cost of raw materials and now finished goods going up is only going to trickle down to the consumer even further. The other problem is with supply. While it is well and good to support American forges and factories, there is a true limit to what they can produce vs the overall demand and there is no way those industries would be able to scale large enough and fast enough to fill that vacuum (as Ozz alludes to above).

Politics aside, it's a sticky situation for sure....


OTOH, basing one's profit margin on the price of dumped Chinese steel and aluminum was not a good business decision. It could not go on like this forever. Steel and aluminum are commodities and, in a hot economy, raw material prices go up.

[ftf]

OTOH, basing one's profit margin on the price of dumped Chinese steel and aluminum was not a good business decision. It could not go on like this forever. Steel and aluminum are commodities and, in a hot economy, raw material prices go up.

A hot economy didn’t change the prices tariffs did.