Pump industry need to worry following U.S. President Donald Trump announcement that he is imposing 25 and 10 percent import tariffs on steel and aluminum respectively, effective March 23.
The U.S. President argues that the new tariffs will bring down the United States’ trade deficit.
The tariffs will have a big impact on the pumps industry since steel and aluminum are key components of the industry, experts say. With Canada and Mexico excluded from the tariffs, President Trump hinted at exempting other unspecified countries from the tariffs.
While it may appears to be directed at China and Asia, South Africa which is Africa’s top steel and aluminum exporter, is yet to know its fate in this directive.
Industry leaders are reacting to the news and the South African government has said it is studying the implications for the country’s exports of the two metals.
South Africa exported $950 million worth of steel to the US in 2017 and accounted for 1.4 percent of the US’s global imports.
But how will these tariffs affect the pump industry across the globe and Africa specifically?
The majority of pump construction is made of steel and many pump manufacturers source their castings outside of the U.S. The tariffs will challenge the pumps industry and it definitely will have a negative impact.
While reacting to the news, Todd Loudin, Flowrox president and CEO of North America operations said he was trying to determine which other countries other than Canada and Mexico will be exempted and on a larger scale, what other countries will do in retaliation.
He further stated that prices will need to increase or profitability will be negatively impacted and that some manufacturers may choose to shift purchasing to secure castings and components in U.S., Canada or Mexico.
While pump industry leaders say it is still too early to tell what will happen, they concur that the move could have some lasting implications.
They believe that the biggest effect to the pump industry will be from a production cost standpoint that will be determined by what, exactly, the tariffs cover and that it’s only rolled products and bar stock, the impact on production cost could be low, but higher if it is the materials used in the casting process.
This would mean that certain pump manufacturers may be made less attractive or competitive.
Costs Will Rise
Trade economists have argued that anyone who uses steel is going to be economically hurt.
They say that, without doubt, the price of steel and aluminum products will go up and the profit margins will be squeezed. Steel products will cost more, and so, the production costs will increase. Pump manufacturers will pay more for steel and aluminum components, so they will cost more to produce, a cost they may pass along to users.
Some manufacturers already have announced that they will impose a surcharge on their products to offset new costs incurred from the tariffs.