What the Steel and Aluminum Tariffs Mean for One Ohio Manufacturer

Mar 8, 2018

Manufacturers who make products with steel and aluminum are expected to see their costs rise after President Trump's tariffs go into effect. But Whirlpool Corp., which makes washing machines at a plant in Clyde, may come out clean.

In January, the Trump administration imposed a tariff of up to 50 percent on imports of large residential washing machines. Shortly after the announcement of the tariff, Whirlpool issued a statement applauding the decision. Jeff Fetting, chairman of Whirlpool, called it "a victory for American workers and consumers alike."

But then, six weeks later, President Trump announced more tariffs—this time on imported steel and aluminum. The move could raise costs for a company whose main products are basically big boxes of steel and aluminum, said David MacGregor, a financial analyst with Longbow Research in Independence. Although Whirlpool mainly uses domestic steel, he said, tariffs on the metals will put inflationary pressure on U.S. steel prices.

"It's definitely going to impact them, the question is going to be the extent to which they're impacted," MacGregor said.

A Whirlpool spokesman declined to comment. But MacGregor said the effect of the two tariffs on Whirlpool is far from a wash.

"They're going to achieve far more in the way of benefit from the tariffs on washers" than they will be hurt by the increases in steel and aluminum prices, he said.

All tariffs are not equal
To understand why, consider the levy on washers, which in the first year will include a 20 percent tax on the first 1.2 million imported machines, and a 50 percent tax on any machines after that. Last year, LG and Samsung imported about 4 million washing machines, MacGregor said, so they would almost certainly raise their prices rather than absorb the full cost of the tariff.

That price increase would in turn allow Whirlpool to raise its prices, "which would more than offset the higher cost of steel and aluminum," said MacGregor.

Then, MacGregor said, consider the fact that Whirlpool mainly uses domestically made steel; although the price would likely rise if a tariff were imposed on imported steel, it probably wouldn't increase by the full 25 percent proposed by Trump. Finally, appliance manufacturers such as Whirlpool typically buy their raw materials a year in advance, so the company would be protected from any major spikes in the price of steel in the short run.

Consumer cost
Doesn't this all spell higher prices for consumers? Probably.

But MacGregor adds that an increase in the price for washers has been overdue, because unfair trade practices by both steel and appliance manufacturers overseas have kept the price artificially low for decades.

"I would argue that the consumer has been buying them for less than they really were worth for a long time," he said.

Still, MacGregor's bullishness doesn't seem to be reflected in Whirlpool’s stock price, which is trading lower than it was before the washing machine tariff was announced.