With the rise in inflation rates, economists are looking at another likely suspect: import tariffs. There is a growing belief that apart from the usual suspects of stimulus spending and easy monetary policy, import levies are playing a part.
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Housing Material Tariffs
In an effort to shield American companies from an excess of cheap imported products, former President Donald Trump implemented import tariffs on products such as lumber, steel, and Semiconductors.
Even then, US businesses that import the materials oppose the levies. These businesses are now making a push at President Joe Biden’s administration to remove the import tariffs.
They believe that tariffs helped push higher prices and contribute to product shortages. These two factors are now hampering the US’s post-pandemic recovery efforts.
No Justification For Import Tariffs Right Now
Scott Buehrer is president of B. Walter, a fabricated metal products manufacturer. He said beginning September, he absorbed at least 15 price increases from his steel supplier.
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“What’s the justification for these tariffs when you have sky-high steel prices?” he said. B. Walter is among the 300 manufacturers that wrote to Biden earlier this month asking to remove the 25% tariff on steel and 10% on aluminum.
However, some economists removing tariffs won’t help in easing price pressure on materials. At the most, tariffs can only produce muted effects on prices.
The White House said it is reviewing the policy but gave no indication if and when they will lift the levies. The manufacturers insist that import duties make them less competitive at a time when there is a great demand in the US market.
As a result, US buyers pay up to 40% more for steel products compared to their European counterparts.
Buehrer said he cut his payroll by 10% to reduce costs as prices of rolled steel nearly tripled. However, labor unions and the steel sector urged Biden to keep the metal tariffs in place.
In a May 19 letter that the policy allowed the industry to reopen idle mills and rehire workers. “The tariffs have been in place since 2018 and there has been no inflationary pressure since then.
The U.S. has put trillions of dollars of stimulus into the economy. That is going to impart some inflationary pressure,” said Roy Houseman, legislative director at United Steelworkers.
Home Building Industry Affected By Tariffs As Well
Meanwhile, the home-building industry is also dealing with soaring prices. Futures contracts of lumber in May reached more than $1,600 per thousand board feet.
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This is four times the typical price of lumber at this time of the year. In fact, the National Association of Home Builders estimates the higher lumber prices added $36,000 to the price of a typical single-family home.
Robert Dietz, chief economist of the National Association of Home Builders. “It doesn’t make any economic sense to be taxing things when you don’t have sufficient domestic supply,” said “Appliances, washing machines, literally the nuts and bolts that go into making a home—screws, and nails—are subject to some of the metal tariffs.”
In addition to steel and aluminum tariffs, the industry wants Biden to eliminate tariffs imposed in 2017 on Canadian softwood lumber.
The tariffs are part of a long-running dispute between US and Canadian lumber producers. Instead of removing the duty, the Commerce Department issued a preliminary decision on May 21 to double the levy to 18%.
The department concluded that Canadian imports remain heavily subsidized. The tariffs will remain at the current 9% until a final decision on the proposed increase is made by November, a Commerce Department official said.
Watch the Metal Roofing earning Channel’s report on steel price forecast and steel supply 2021 Q3 Update: Metal Pricing And Steel Shortage:
Do you agree that import tariffs are part of the reason for inflation right now? Will removing the tariffs reduce prices?
Let us know what you think about the US import tariff issues and how it affects inflation. Share your comments in the comment section below.