- REUTERS/Umit Bektas
- President Donald Trump announced a steel tariff of 25% is coming next week.
- The tariff could mean big price increases for US steel companies.
- It also means higher costs for steel buyers.
- But Cowen and Company analyst Novid Rassouli says the tariffs shouldn’t cause too much inflation.
President Donald Trump’s proposed tariffs probably won’t cause as much inflation as everyone thinks, according to Cowen and Company analyst Novid Rassouli.
Thursday, Trump announced he was getting ready to slap tariffs on imports of steel and aluminum.
“We’re going to build our steel industry back; we’re going to build our aluminum industry back,” Trump said.
The president said the tariffs, which are taxes on imports, would be 25% for steel and 10% for aluminum. In a meeting with executives from steel and aluminum producers, Trump said the tariffs would be rolled out next week to help bolster the US metal industries.
“We’ll be signing it next week. And you’ll have protection for a long time in a while,” Trump told the executives. “You’ll have to regrow your industries; that’s all I’m asking.”
And while the tariffs are expected to significantly boost the market share of domestic steel and aluminum manufacturers, they have sparked concerns over inflation.
But a steel price increase, even one as drastic as the 25%, Rassouli said, still wouldn’t cause huge price increases across the economy.
That’s because steel and metal prices only make up a small portion of the price in things like cars and houses. When automakers or homebuilders produce their goods, the cost of buying the metal is relatively low, compared to the total cost of putting the good together.
“If steel goes up 20%,”Rassouli said, the price of a car “might go up immaterially.” He gave the example that a car worth $30,000 would only increase $200 on a 20% steel price increase.
Former Nucor CEO Dan DiMicco agrees. He told CNBC Thursday that a $1,000 per ton increase in the cost of steel would maybe raise a car’s price $100 or $200 and that it’s a “non-issue as far as the fear mongering that’s going on.”
General Motors isn’t concerned either. “We purchase over 90 percent of our steel for U.S. production from U.S. suppliers,” the company said in a statement. “We need to better understand the details around the announcement today, but the bottom line is we support trade policies that enable U.S. manufacturers to win and grow jobs in the U.S., and at the same time succeed in global markets.”