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June 05, 2018

Steel and Aluminum Tariffs Could Lead to Fallout for Promo Industry

By  Christopher Ruvo

Late last week the Trump Administration announced tariffs on imports of steel and aluminum from Canada, Europe and Mexico some analysts fear will ignite a trade war that damages economies and kills jobs in affected countries and the U.S. – a stark forecast that, if realized, could hurt collective sales in the promotional products industry. Tariff proponents, including President Donald Trump, believe the measures are a step toward leveling the playing field for the U.S. when it comes to international trade, adding that the 25% import tariff on steel and 10% tariff on aluminum will strengthen the American economy.

Canada, Europe, and Mexico weren’t about to take the U.S. tariffs lying down. Canada announced retaliatory measures, saying it would place tariffs on $16.6 billion in U.S. imports, including everything from steel and aluminum to mayonnaise.

Meanwhile, unionized American steelworkers, who are among those the Trump Administration’s tariffs are intended to benefit, called on the U.S. president to exempt Canada from the tariffs.

In Mexico, government officials criticized the U.S. tariffs, saying they’re not justified, while pledging to retaliate with tariffs on American lamps, pork, fruit, cheese, flat steel and more.

Overseas, European Union officials were outraged by the imposition of the tariffs. Cecilia Malmström, the EU’s top trade commissioner, called the tariffs “illegal.” She said the EU would make a case in support of that position to the World Trade Organization.

It wasn’t clear Monday if the EU planned to move forward with retaliatory tariffs. However, European officials have previously mentioned potential tariffs on American products that include everything from Harley-Davidson and Levi’s jeans to Kentucky bourbon.

Back in the U.S., some members of Trump’s Republican Party are not in favor of the tariffs because of the potential repercussions.

Some analysts think Trump’s tariffs could backfire on the U.S. They argue the tariffs will drive up the cost of steel and aluminum domestically, hurting the bottom lines of industries that rely on those products, including the construction, oil and utility sectors, as well as food and drink providers that need the materials for cans. Critics also note that retaliatory tariffs could be detrimental to the international sales of American companies who sell affected products.

Should they come to pass, such scenarios could potentially harm the promotional products industry. U.S. end-clients in tariff-impacted industries could start clipping their promo budgets as part of cost-cutting, leading to reduced sales for promo distributors and suppliers. These customers could also lay off workers, meaning fewer employees to equip with uniforms and/or company-branded apparel and hard goods. Several promo suppliers that provide products like stainless-steel tumblers told Counselor it initially appears such items will not be affected by the tariffs, but admitted they are still reviewing the potential implications.

The Trump Administration is looking at a possible trade war on multiple fronts given recent tariff decisions on Chinese goods. If a full-fledged trade battle breaks out with China in particular, the promotional products industry would likely be in the middle of it. Tariffs on imported Chinese goods have the potential to raise the price of promo items sold in North America, as the vast majority of products available here continue to be produced abroad, particularly in China.