Manufacturers ask Biden to repeal Trump's steel tariffs, shortages are coming to reopening economy
Monday Morning Wake Up Call
May 10, 2021
More Than 300 Manufacturers Just Asked Biden To Repeal Trump's Steel Tariffs as Prices Skyrocket
(Reason) Steel prices are surging and American manufacturing is paying the price—literally, thanks in part to the ongoing consequences of former President Donald Trump's tariffs, which President Joe Biden has not removed.
On Thursday, more than 300 manufacturing businesses sent a letter to the White House urging Biden to repeal Trump's tariffs, which the signatories say have contributed to supply shortages, long lead times, and artificially high prices for key inputs made of steel and aluminum.
"It is businesses manufacturing in America such as ours who pay the tariffs on imports, and it is our businesses and employees who suffer when our product cannot compete with overseas manufacturers because the U.S. is an island of high steel and aluminum prices," reads the letter, in part. The manufacturers say that they are forced to pay prices as much as 40 percent higher for some steel products than overseas competitors, an "unsustainable situation for any U.S. employer."
According to SteelBenchmarker, an industry publication, one metric tonne of American-made hot-rolled band steel is now priced at over $1,500. That's nearly three times more expensive than it was at this same time last year.
While the economic recovery has caused sharp increases in the price of steel made in China and Europe as well, the real problem for American manufacturers is that prices for American-made steel are running well ahead of the rest of the world. In other words, there is likely more than just surging demand and slow-to-recover supply driving the sudden hike in American steel prices. Tariffs are almost certainly part of the explanation.
American-made steel closely tracked global prices until mid-2018, when Trump imposed 25 percent tariffs on imports of foreign steel into America. Since then, American-made steel has diverged significantly from global prices.
For American manufacturers that require raw steel inputs to make anything from cars to kitchen appliances, that's a problem. Buying foreign steel meaning saving some money, but then owing a 25 percent tax to the federal government—because tariffs are really just taxes.
The goal of Trump's tariffs was to increase the competitiveness of American-made steel relative to the rest of the world, but that does not appear to have happened. Instead, American steelmakers have simply been able to raise prices even faster because they are protected from competition.
And while higher domestic steel prices could, in theory, nudge American steelmakers to invest in expanding plants and hiring more workers, that doesn't seem to have happened either. Even amid surging prices, U.S. Steel announced this week that it was canceling plans for a $1 billion expansion of one of its major steel plants in Pennsylvania—an expansion Trump had touted as evidence that his tariffs were working. Bank of America, meanwhile, is warning that high steel prices are likely a "bubble" that will soon burst, rather than a stable long-term situation that would encourage steelmakers to invest in more capacity.
The manufacturers petitioning the White House for relief say it takes up to 20 weeks for some orders to be filled—three to five times longer than the four-to-six-week wait that was typical before the tariffs.
"We support a strong and thriving steel and aluminum industry," the manufacturers told the White House in their letter, "but producers today simply cannot meet demand and the tariffs create a tax that only manufacturers in the U.S. must pay."
The Biden administration has waffled between defending Trump's tariffs as "effective"—which they are clearly not—and promising to be more discerning about how it uses (or abuses) the executive trade powers Trump stretched to new limits.
Neither approach offers much relief for American manufacturers that have been caught in the middle of misguided federal trade policies for over three years. Biden should set aside politics for a moment and listen to what they have to say.
Can't find chicken wings, diapers, or a new car? Here's a list of all the shortages hitting the reopening economy.
(By Business Insider)
An ongoing computer-chip shortage has affected cars, iPads, and dog-washing technology alike. Chipmakers like Intel had already seen production issues pre-pandemic, but as with many industries, COVID-19 brought a variety of new supply-chain issues. The chip shortage is a problem for consumers wanting basically anything with a computerized component, which is much of the economy. Take cars as an example.
The semiconductor shortage has hit automakers the hardest. In January, the consulting firm Alix Partners estimated the automotive industry would lose $61 billion in revenue from the shortage this year. As Insider's Katie Canales reported, demand for chips has gone up as consumers scrambled to buy cars and other technologies that use them.
But as more cars went into production, chip competition went up. Since then, many carmakers have been forced to shut down plants and prioritize which models they produce, while car prices at dealerships have continued to go up.
Last week, Tesla CEO Elon Musk said the semiconductor shortage has caused "insane difficulties" for the electric carmaker. Even Apple — a company that many thought would be able to dodge the shortage after it started making its own high-powered computer chips last year — said it will delay production on its iMac and iPad.
Used cars and rental cars
Buyers are still looking for vehicles, creating a competitive used-car market. As USA Today reported, used-car prices are on the rise as the aforementioned chip shortages affect new-car production, and buyers have turned to older ones instead, while Axios reported the average price of a used car has hit $17,609.
A UBS note estimated that in April, used cars saw their largest monthly price increase in 68 years of tracking, with prices rising between 8.2% and 9.3%.
If you're looking to rent, you might also be out of luck: Insider's Brittany Chang reported on the "perfect storm" hitting rental cars right now, with prices surging and demand increasing. Americans are itching to go on vacation this summer, as more people are vaccinated and some restrictions loosen. That's leading to far more demand — but rental-car companies had sold off parts of their fleets early into the pandemic, leaving fewer cars to go around.
It's not all bad news for used-car lovers, though: As USA Today reports, the trade-in market is hot, too, meaning your old car could be worth more right now.
Industry experts say drivers will face fuel shortages this summer.
Industry experts say drivers will face fuel shortages this summer.
Demand for fuel and interest in travel has risen as vaccination rates have increased. Lower gasoline-production rates have also made the commodity more valuable, as OPEC has been slow to curb production cuts.
Gas prices have skyrocketed in recent months, jumping 22.5% in March from the previous year, according to the US Bureau of Labor Statistics' Consumer Price Index. Much of the surge in gas prices started with the extreme Texas freeze, which halted a fifth of the country's oil-refining capacity in its tracks for weeks at a time.
Plastics and palm oil
The devastating winter storms in Texas also left their mark on the plastics industry. As Insider's Natasha Dailey reported, the state is a key plastics exporter — and the storms made many plants, which are difficult to reactivate, press pause.
According to the Financial Times, rising plastic prices have led to an increase in packaging costs. Citing data from Mintec, the Financial Times reported that those costs have increased by nearly 40% from the start of 2020, marking "historic highs."
Palm oil, which is in a majority of those packaged products, also saw its prices climb, according to the Financial Times. That's due to yet another labor shortage; the industry had already been contending with finding more sustainable production methods.
Truckers and rideshare drivers
In September, Insider's Rachel Premack reported that pay for truck drivers was on the rise, coming in at "record-smashing levels." But the pay hike — and increased demand — comes after an exodus of drivers in 2019; Premack reported at the time on what some called a "trucking bloodbath," as trucking companies saw profits fall, with some even going bankrupt.
Now demand is surging, according to the Journal, and if everything continues as is, that gap could deepen.
Demand is surging for rideshares, too, but the drivers are not matching it. In March, Uber saw its highest-ever number of bookings. The company even said drivers in some cities were making over $40 an hour. Even so, current and former drivers outlined some of their concerns with returning to Insider's Tyler Sonnemaker. Chief among them were pandemic safety concerns and holding out for better offers.
In fact, Insider's Tom Dotan reported, more than half of Uber and Lyft drivers have stopped, well, driving. Both platforms have offered incentives to lure drivers back, and Uber has said it'll pour $250 million into getting those drivers back out, Sonnemaker reported, "effectively bribing drivers to get back on the platform."
Homes and vacation houses
The US was facing a shortage of 3.8 million homes as of April, according to Freddie Mac. Home builders have been struggling to keep up with demand as remote work fuels interest in spacious housing, with house prices rising at their fastest pace in 15 years, The Wall Street Journal reported. Lumber prices are also driving the cost of new homes even higher.
In the past year alone, the median cost of a home in the US shot up 15% from $300,000 in 2019 to $340,000 by the end of 2020, according to data from the National Association of Realtors. That measure does not even begin to account for hot housing markets like Austin, Texas, where the average home went for more than $800,000 in April.
Even vacation-home rentals are at an all-time high. A house in the Hamptons rented for $2 million this summer, and 85% of vacation rentals in popular destinations like Cape Cod, the Outer Banks, and the Jersey Shore are booked through August, according to the rental site VRBO.
If you're wondering why the houses around you are getting more expensive, look to their component parts. No, seriously: Lumber prices have soared, and, as Insider's Ayelet Sheffey and Libertina Brandt reported, builders are even increasing house prices in an attempt to offset demand.
It's due to another pandemic disruption, as lumber mills were forced to temporarily close for safety concerns. When they reopened, they couldn't keep up with a scorching-hot housing market, goosed by a work-from-home economy, record low mortgage rates, and the need for personal space during the pandemic.
According to an April analysis from the National Association of Home Builders, soaring lumber prices added $36,000 to the cost of a new home. Lumber prices "remain stubbornly high," according to the report, due to mills shutting down, unexpected demand from big-box retail and DIY-ers, and tariffs imposed on Canadian lumber.
Household products like toilet paper and tampons
Many household goods including toilet paper, diapers, and tampons are also facing supply problems.
One of the biggest producers of the pulp used to create toilet paper told Bloomberg that port delays and high shipping costs are causing companies to push delivery dates back months.
Shortages and shipping delays are causing many companies to hike prices. Last month, Proctor & Gamble said it would raise prices for baby-care and feminine-care products, as well as adult diapers to combat shortages and shipping costs. The same week, Kimberly Clark hiked the price of its Huggies diapers and Scott toilet paper.
The work-from-home lifestyle helped the furniture industry boom but to such an extent that customers are seeing delivery dates that are months out.
In February, La-Z-Boy executives said customers could expect delivery dates that are five to nine months out from their order dates. Other furniture companies like Kasala, a Seattle-based chain, said they don't expect to get furniture parts until at least December. Many US furniture stores use parts from China. The global shipping-container shortage, as well as delays at key ports in Southern California have not only made the goods more expensive, but have also pushed back delivery dates by several months.
The furniture shortage has been exacerbated by a spike in homeownership, as the number of available and unsold homes sits at record lows. In other words, a lot of new homeowners are waiting a long time for their new living-room sets.
If you've been having trouble finding chicken wings, you're not alone: They're hard to come by as supply tightens. Insider's Avery Hartmans reported that chicken-wing supply is dwindling while prices rise. It's due in part to increased demand and shortages caused by devastating winter storms in Texas.
The Washington Post reported that shortages go beyond just wings, with all chicken harder to get ahold of. One phenomenon The Post notes: Fried chicken sandwiches, which have gained viral popularity in the past few years. McDonald's has even launched its own. Insider's Mary Meisenzahl reported that the KFC Nashville hot chicken has been so popular on TikTok that the chain is running out of the hot sauce for it.
Bacon and hot dogs
Bacon and hot dogs will likely be in short supply this summer.
The pig shortage dates back to the onset of COVID-19 and outbreaks in at least 167 meat-processing plants forcing almost 40 plants to close as of June 2020. As vaccination rates pick up and people prepare for summer vacations and cookouts, analysts told Insider's Natasha Dailey demand will outstrip supply.
With pork companies still struggling to overcome lower production rates in 2020, the matter only intensified when high instances of disease hit the hog population this past winter.
Imported foods like cheese, coffee, and olive oil
Imported goods including coffee, cheese, seafood, and olive oil are facing months of shipping delays.
Dozens of mega-containers ships are waiting to dock off the coast of Los Angeles. The site accounts for about one-third of US imports, and the backlog is causing ships to wait weeks to dock and unload.
Some companies are already seeing the impact on their shelves. In March, Costco said its supplies of cheese, seafood, and olive oil were running low.
General Mills said it has been forced to raise prices due to the delays increased shipping costs. Coca-Cola also raised prices to combat the supply-chain crunch. Neither company specified which products would be affected.
Coffee has also been hit by delays, Bloomberg reported in March. Peet's and JM Smucker, the brands behind Folgers and Dunkin' coffee, have said they're facing rising costs. Reuters reported that in February, port delays pushed coffee prices to their highest point in more than a year.
This summer pool owners will see the worst chlorine shortage in US history, according to CNBC.
Supplies of the chemical have been strained since a fire at the chlorine manufacturer BioLab in Louisiana in September. The price for chlorine used in pools has nearly doubled this past year and is expected to rise even more to meet demand this summer.
Insider's Annabelle Williams reported that pool owners could help avoid the shortage by resorting to saltwater pools.
Corn is a key crop for many products, including fuel and different foods. As supply concerns loom, corn prices are popping off, according to Axios.
There's a few reasons that demand is so high: After an outbreak of swine fever in China, pig herds were "decimated," according to Axios, leading to huge corn demand in China. That spike in demand is coupled with corn crops in Brazil and Argentina experiencing both bad weather and pandemic-related labor shortages.
Now corn prices are on a record-setting clip, rising by 16% in April alone.
And, as Fortune reported, there could be a domestic supply issue too. Droughts and a rough winter are both concerning — and if American crops can't fill in the gaps, prices could rise even more.
Finally, a commodity unlike all the others is in surprisingly short supply: workers. Major labor shortages are hitting businesses across America. As Insider's Kate Taylor reported, chains like Dunkin' and Starbucks are struggling to find workers — leading to reduced hours and hesitance on opening indoor dining back up.
There's a few possible reasons that unemployed workers are opting not to return, according to Insider's Ayelet Sheffey. They include workers making more on unemployment benefits than in their prior work as well as continued concerns over COVID-19 and the need to provide childcare at home.
As Insider previously reported, female tipped workers experienced lower tips and increased harassment during the pandemic.
One potential solution for ending this shortage, according to Taylor? Paying workers more.
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