In theory, manufacturers in Rhode Island who primarily use American-made steel shouldn’t be penalized for the placement of new tariffs on imported steel and aluminum.
But they, too, are preparing for price increases related to President Donald Trump’s decision to enact tariffs of 25 percent on steel and 10 percent on imported aluminum. The reason is the sudden spike in demand for U.S. steel and aluminum, which is pushing those prices higher.
Richmond-based VIBCO Vibrators, which uses both aluminum and steel, has already received a market update from a metals distributor that indicates prices and delivery times are increasing on specific products, and reserve inventories are being depleted.
One common form of steel used in manufacturing has increased by $200 a ton since January, to $830 a ton, a 32 percent rise, according to VIBCO.
The manufacturer of industrial vibrators and compactors uses steel or aluminum in about three-quarters of its products, according to CEO Karl Wadensten.
The tariffs announced by Trump as a means of restoring the U.S.-based steel industry were imposed on March 23. As a candidate, he had promised to restore the steel-manufacturing industry and criticized China for dumping less-expensive steel in the U.S. market.
Within days of the tariff announcement, the administration agreed to exclude imports from Mexico and Canada from the steel and aluminum tariffs and agreed to consider further waivers for countries and specific imported products through a federal application process.
A summary published by the U.S. Department of Commerce indicates the tariffs were the result of investigations conducted by Commerce and reviewed by federal agencies.
Wadensten said he and VIBCO engineers have been discussing ways to make sure they have enough supply. The tariffs were not expected, and so not built into VIBCO’s pricing on its products. Although in theory more demand will spark hiring at domestic mills, Wadensten is worried that process will take some time.
The market update received by VIBCO indicates domestic mills have had trouble ramping up to full capacity, given low unemployment.
“I have a bunch of concerns,” Wadensten said. “No. 1, will it change our competitive advantage as far as pricing and delivery, both domestically and globally? No. 2, is delivery and lead time. I don’t care where you are in the world today, people are very sensitive to lead time. They will generally work with people who can get it done quickly.
“No. 3, when tariffs like this happen, it’s almost as if you have a slowdown in the economy where you start weeding out suppliers. It has that same effect. Certain people may have advantages because of their size and scope and relationships that they have in getting steel delivered to customers. And others, it’s going to shake out a bunch of smaller, or nonefficient dealers. You’re going to get consolidation in the distribution channel.”
Other manufacturers have expressed varying levels of concern.
John Tremblay, vice president and general manager of West Warwick-based Guill Tool & Engineering Co., receives daily shipments of steel and is keeping an eye on the market. The company manufactures extrusion tools.
“Right now, it’s too early to tell, but … we’re going to be watching very closely,” Tremblay said.
Like VIBCO, Guill purchases only U.S. steel. As a federal government contractor, it is required by federal law to source U.S. materials for those sales. It hasn’t had an issue with lining up supplies as yet, Tremblay reported.
“Right now, supply should most likely be able to keep up,” Tremblay said.
Michael Greenhalgh is director of operations for Yushin America, a Cranston subsidiary of a Japanese company that manufactures industrial robots.
‘If we do not get supply, then we’re really messed up.’
KARL WADENSTEN, VIBCO Vibrators CEO
It’s too soon to tell what the impact of the steel and aluminum tariffs will be on the business, he said. The company uses both aluminum and steel in its manufacturing process, and like VIBCO, sources it through U.S. plants.
Yushin is anticipating volatility in the metals prices. The company has enough supply on hand for its needs well into the second quarter but is watching the market.
Greenhalgh took the long view of the tariff impacts – that over the long run, it will strengthen the U.S. economy by helping the steel industry.
“In the short run, it may cause some pain,” he said. “In the long run, it’s better for us as a country.”
But Wadensten fears it will take years for the steel plants to return.
“If we do not get supply, then we’re really messed up,” he said. “What we’re ramping up to do right now is buy a ton of inventory, before it gets short. I’m not even worried about the price so much now. I’m worried we’re going to be short.”
