Save on HVAC System Before New Tariff Taxes Raise Prices!
President Trump signed an order on March 8, 2018 to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports, excluding Mexico and Canada (although this may change). The new U.S. tariffs took effect 15 days later on March 23, 2018.
While there is still a lot of uncertainty about the economic effects, these new U.S. tariffs will undeniably raise expenses for many U.S. manufacturing industries. All aluminum and steel manufactured products will be immediately impacted, especially in the HVAC industry.
According to Tom Craig, executive vice president of operations at Value Added Distributors:
“…it’s going to be unavoidable that there’s going to be some price increases, and the confusion is going to be when you get out of just the pure metal products. How much is it going to be, who’s going to go first, and what is the timing going to be?”
What Are Tariffs?
A tariff is a tax of duty imposed by a government on imported or exported goods, although tariffs on exports are very rare. The idea is to increase the domestic supply of goods by regulating foreign competition. Tariffs are collected by customs officials and sent to the government.
Reasons For and Against the New U.S. Tariffs on Steel and Aluminum
By raising tariffs on foreign steel and aluminum, the U.S. is trying to make U.S.-produced steel and aluminum more attractive. Typically, tariffs benefit the producers (in this case of steel and aluminum), and the government, at the expense of consumers.
The new tariffs are seen as a great boon to struggling U.S. steel and aluminum industries. Other manufacturing segments, such as auto, aerospace, and HVAC have criticized the move.
The Air Conditioning, Heating, and Refrigeration Institute (AHRI) and others wrote a letter to the President expressing their worries and disappointment:
“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.”
President Trump defended the tariffs, tweeting:
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!
— Donald J. Trump (@realDonaldTrump) March 1, 2018
We must protect our country and our workers. Our steel industry is in bad shape. IF YOU DON’T HAVE STEEL, YOU DON’T HAVE A COUNTRY!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
According to the official “Presidential Proclamation on Adjusting Imports of Steel into the United States” document:
“The Secretary [Secretary of Commerce] found that the present quantities of steel articles imports and the circumstances of global excess capacity for producing steel are ‘weakening our internal economy,’ resulting in the persistent threat of further closures of domestic steel production facilities and the ‘shrinking [of our] ability to meet national security production requirements in a national emergency.'”
A battered steel and aluminum industry poses a national security risk since these materials are necessary for the production of wartime materials, such as ships, weapons, vehicles, and other supplies. In the event of war, the United States would be dependent on foreign sources and possibly unable to supply its own materials.
Therefore, the official reasons for the tariffs is national security. However, there are surely other motives as well.
How Are You Affected?
Regardless if HVAC manufacturers buy their steel from the U.S. or abroad, these tariffs will raise costs, which will be passed down to the consumer (you). Another concern is that companies will move manufacturing overseas to avoid the tariffs since they are mainly on raw materials and not finished products. Some estimates say the new tariffs could cause 30,000 jobs to be lost.
In addition to HVAC systems, you can also expect increased prices for automobiles, electrical equipment, building materials, and more.
This isn’t a maybe situation. These tariffs will have an immediate impact on many industries, not just HVAC. Manufacturers will pass on the costs to the consumers by raising prices.
Prices have already started to rise considerably. According to a statement released by Hercules Industries, a manufacturer and distributor of HVAC sheet metal:
“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.
Fortunately, Hercules has maintained a close relationship with our domestic mills over the years, and we plan to leverage our relationship to ensure we can meet the demand of our loyal customers. 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.”
Unfortunately, there remains a lot of market uncertainty. The U.S. government was supposed to come to a decision regarding whether to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico on May 1st, but the decision has been postponed for another 30 days.
We still don’t know whether the European Union, Argentina, Brazil, South Korea, Australia, and others will be subject to the new tariffs. Not knowing the full scope of these tariffs makes any economic forecasting difficult.
The delay complicates things, but prices for HVAC equipment will rise—the question is simply by how much.
Interest Rates Will Rise Too!
The central bank has already increased interest rates by a quarter of a point, and three more rate hikes are predicted for 2018.
Higher tariffs and higher interest rates will raise consumer prices. While the connection between tariffs and interest rates is complicated and uncertain, according to Societe Generale Chairman Lorenzo Bini Smaghi, “Tariffs may be inflationary for the U.S., which may lead the U.S. to raise interest rates even faster.”
With rising consumer prices and interest rates, NOW is the time to replace your heating and air conditioning system! The longer you wait, the higher the prices will go.
For a limited time, we are offering up to $2,250 OFF a Complete Comfort System! Hurry, before tariff taxes and interest rates go up! Expires 5/31/18.
Contact Pacific Heating & Cooling for more information: