For some Northwest Washington companies, the on-again, off-again, now on-again tariffs on metals have been like riding a rollercoaster. One made of steel, or aluminum.
Tariffs — which are a tax paid by the importing company to the government — were applied to all steel and aluminum imported into the U.S. starting on Wednesday, March 12. The 25% tariff followed a series of announcements dating back to January, a brief imposition of tariffs on Canada and Mexico on March 4 that was suspended March 6, and even a later threatened 50% tariff on Canadian metals that was withdrawn the same day.
But the worldwide 25% tariff on steel and aluminum will likely affect Canadian imports the most, since U.S. companies import more of both metals from Canada than from any other country — in the case of aluminum, according to U.S. government data, twice as much as the next nine countries combined.
Pre-purchasing aluminum
That reliance on imports is top of mind for All American Marine.
“Tariffs do directly impact our business as our boats are all aluminum,” said Daniel Zech, business development manager for the Bellingham-based manufacturer of custom vessels for commercial, research and passenger transportation.
Zech said All American already had some plans in place before the March tariffs began, ordering aluminum for two projects in advance. The company, he said, is “now warehousing hundreds of thousands of pounds of aluminum in our facility to mitigate against tariff increases.”
But that storage takes up manufacturing space, and the company can’t pre-buy everything it needs. Instead, All American has talked with its customers to increase initial milestone payments to acquire aluminum. And the back-and-forth over tariffs already has cost the company some business.
“We were building a 130-foot aluminum superstructure for a project that was commissioned to us by a Canadian customer,” said Zech, a vessel that was later supposed to go to another U.S. shipyard for steel work. Instead, he said, due to the looming tariff the customer wanted the superstructure put on a barge and shipped, uncompleted, to Canada.
“We lost at least, at a minimum, two months of work for 20 employees, maybe three months,” he said. “That’s a direct job impact.”
Zech said the boat builder is working to “future proof” as much as possible. The focus, he said, is on hard costs and reacting to that. But the fluid nature is a challenge.
“We’re very anxious about what the secondary and tertiary effects are going to be. And there’s no way I can fully forecast how that’s going to be,” Zech said. “Are some people just passing along costs? Or are some just being opportunists, raising their prices and blaming the tariffs? I can’t price to my customers on uncertainty.”
Educating customers
Also watching the impact of tariffs carefully are HVAC firms that rely on sheet metal — typically aluminum or galvanized steel — for parts of heating, ventilation and air conditioning systems, including fabricating ductwork.
Brad Barron, CEO and partner at Barron Heating AC Electrical & Plumbing, said the Ferndale-based company isn’t raising any prices immediately. But it is getting regular updates from its vendors on pricing for products and equipment.
“We’re actually pretty well positioned right now in terms of protecting our customers from tariffs.” Barron said, citing that it works with manufacturers both outside of and inside the U.S. “We stay in daily contact with distributors, vendors and suppliers that we have had a relationship with for decades. We will know well ahead of time if a piece of equipment will have a surcharge due to tariffs.”
In the near term, he said the approach is educating customers in its service area of Whatcom, Skagit, Island, San Juan and part of Snohomish counties, not pushing the purchase of equipment now “just in case” prices go up.
“We will be proactive and not reactive, and the market is very reactive right now,” Barron said. “From an integrity standpoint, we are not going to increase our prices until we get a firm increase from a vendor.”
Not like flipping a switch
If all of this uncertainty makes someone want to reach for a beer from one of the many craft breweries in Whatcom and Skagit counties, well … beer is fermented and stored in stainless steel tanks. And it’s distributed in aluminum cans.
Kushan Brewing Company’s Josh Smith, the company’s brewery operations manager, said he’s been ruminating on the tariffs and their direct impact for the past two months. Kulshan is the largest producing Washington state brewery north of Seattle, with two year-round locations in Bellingham and a seasonal spot at the city’s Portal Container Village.
“Margins are slim on beer, so minding those costs and how we price our products is under regular scrutiny to maintain both our long term sustainability and our profitability,” Smith said. He said Kulshan works with three different British Columbia companies for packaging supplies, and also sources about half of its malt from Alberta.
Even though Kulshan’s primary can vendor is a Canadian company — Smith said Kulshan uses about 1.5 million aluminum cans each year — the cans are manufactured in Washington state. So that doesn’t mean a 25% tariff on each finished can, but the aluminum raw material is subject to tariff.
“Our vendor is expecting an actual increase in the 5-15% range per can,” he said. “Going from 14 cents to 16 cents is better than 14 cents to 21 cents per sealed can, but over the course of a year that’s still an extra $30k we may have to find in our budget.”
The metals tariff also could mean that if Kulshan needs new cellar tanks, the steel price hike “could delay those capital improvements and hinder our ability to meet demand and fulfill distribution orders.” But he said no such improvements are planned in the short term.
Eventually, he said, any price increases from import tariffs will have to be passed along to customers if no comparable U.S. infrastructure or supply is available to replace the imports and meet demand. He’s not opposed to finding alternatives, but said it’s not like flipping a switch.
“Thirty-to-sixty days is not enough time for a manufacturing business like ours to reasonably adapt to an entirely different economic environment,” Smith said.
Frank Catalano writes about business and related topics for CDN; reach him at frankcatalano@cascadiadaily.com.
