President Donald Trump's higher tariffs on steel and aluminum imports took effect Wednesday, sparking concerns of steeper costs for businesses that may eventually hit consumer goods and grocery prices.
The tariffs on foreign metals increased to 50%, up from the 25% rate announced in March. Wednesday's hike would bolster the domestic market and reduce or eliminate the national security threat posed by imports," the president wrote in his executive order.
According to Department of Commerce trade data, the U.S. imports a significant amount of steel and aluminum from Canada. Other major sources of the metals include Brazil, Mexico, South Korea, the United Arab Emirates and Bahrain.
Higher tariffs on steel and aluminum have triggered concerns across the economy as they could affect virtually every business that relies on the metals, from automakers, to plane manufacturers, to homebuilders.
In Washington, small businesses, already weary from months of tariff seesawing, are bracing themselves for yet another hit. In an economically uncertain landscape, many are finding themselves further squeezed between high operation costs and price-sensitive customers.
“Tariffs are one thing,” said John Melin, CEO of Brown & Haley, the Tacoma-based producer of Almond Roca. "Chaos in tariffs is brutal."
The confectioner relies on aluminum and steel in candy packaging. Almond Roca is wrapped in gold foil, an aluminum-based product, and some of the company's holiday tins are made with steel and imported from China. When metal prices rise in response to tariffs, they directly raise the cost of doing business, Melin said.
Because of the company's long-term contracts with retailers, prices for Almond Roca won't go up right away, Melin said. Instead, the company will simply have to eat the higher costs. It's also considering whether to package fewer products in tins and switch to boxes and pouches instead.
Tariffs typically lead to higher prices for importers and consumers.
That's because exporters rarely lower their prices to adjust for tariffs, said Brian Kelly, associate economics professor at Seattle University, who previously conducted an analysis on the impact of steel tariffs during Trump's first term. Instead, importers typically bear those costs and pass them along the supply chain.
"In general, prices are going up to reflect the tariff amount," Kelly said. He expects Wednesday's tariff hike to potentially lead to the cancellation or deferral of industrial and transportation projects, like bridges, buildings and ferry docks.
At the consumer level, he also expects the price of packaged foods to rise in response to tariffs. Canned products are particularly exposed to a tariff price bump. "If you look at a can of peas, a good deal of the cost of that can of peas is the can itself."
Industry groups warned that the tariff hikes would affect nearly everyone.
"A 50% tariff on steel and aluminum will negatively impact U.S. consumers and grocery store shoppers," said Tim Ebner, vice president of communications and marketing for the Can Manufacturers Institute, a trade association for can makers. "That increase of the cost to make canned foods in America will get passed along and reflected in the grocery store checkout line when it comes to your receipts.
Earlier this week, an executive of soup company Campbell's predicted that steel and aluminum tariffs would hit its canned soup and drink products. Chief financial officer Carrie Anderson didn't rule out the possibility of price hikes, reported The Wall Street Journal.
Households that rely more on canned food, including poor people and those who use government benefits to afford food, will be particularly hard hit, Ebner said.
Small and midsize businesses in Washington are worried about higher costs and shrinking margins.
For Cloudburst Brewing in downtown Seattle, aluminum tariffs mean higher aluminum can prices. For the company's next shipment of cans, owner Steve Luke expects prices to go up by about 8.5%.
Other businesses are looking at even higher price increases, he added, because they can't take advantage of the bulk discounts that Cloudburst currently gets.
Like most businesses, higher tariffs put Cloudburst in a bind. The company has higher costs, but is reluctant to raise prices for consumers.
Shoppers are already more price-conscious, Luke said, spending less and shopping around more. At a certain point, raising prices might push them away altogether. So for now, Luke said, the brewery is simply choosing to absorb the cost of tariffs.
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