The Tariffs Soared To 300% On Steel For Tin Cans Will Likely Hit Consumers Market

Does inflation frustrate you when you go grocery shopping? Well, get ready for higher food prices, at least for canned goods. This will be one of several inevitable negative effects of the impending tariffs on tinplate.

Cleveland-Cliffs Inc., an Ohio-based steelmaker, and the United Steelworkers union joined forces in January to file anti-dumping petitions against eight countries and impose countervailing duties against China, The reason was the alleged sale of tinplate steel (also known as tin mill steel, a type of sheet steel). In the United States, the price of tinned steel (mainly used in food packaging cans) is below the market price, while in China, the government subsidizes production. (Unusually, this is only a small piece of the puzzle; Unlike many manufacturing sectors, in tinplate, China is a smaller player, accounting for just over 10 percent of total imports in 2021 from the eight countries mentioned in this action.) Potential tariffs could be as high as 300%.

"The dumping of foreign tin products into the U.S. market has forced deep layoffs at U.S. factories; "Failure to cut production will ultimately depress domestic production and make manufacturers accountable to foreign producers and their prices," said Dave McCall, USW international vice president. "Imposing tariffs on tin mill products is critical to stabilizing our markets, restoring fair prices and protecting good union jobs." "Foreign dumping of tin products into the U.S. market has already forced significant layoffs at U.S. facilities; failure to curtail it will ultimately choke out domestic production, leaving can manufacturers beholden to foreign producers and their prices," said USW international vice president Dave McCall. "Duties on tin mill products are essential to stabilizing the our market, restoring fair prices, and protecting good, union jobs."

"All tariffs are ultimately designed to get the rest of the country to pay for the preferences that the federal government provides for more narrow sectoral interests," said Samuel Gregg, a distinguished fellow in political economy and senior fellow at the American Institute for Economic Research. A recent book, The Next American Economy: States, Nations, and Markets in an Uncertain World, strongly argues against tariffs and protectionism. "This particular case fits that bill perfectly."

"Tariffs will hurt canners and end users," said Thomas Madrecki, vice president of supply chain at the Consumer Brands Association, an industry advocate for U.S. consumer goods companies. "They will make U.S. canning and food manufacturing less competitive and significantly reduce consumer purchasing power." This is not the time to consider such a petition."

But this point is not important. Once initiated, such petitions would follow the clear investigative procedures of the Department of Commerce and the U.S. International Trade Commission, which, by design, does not allow for consideration of the impact on downstream users or consumers. "These charges went through a specific process that took years of lobbying to shape," Mr. Madrecchi said. "The AC/CVD law prohibits consideration of the impact on consumers."

So, predictably, the petitions have advanced steadily this year through several rounds of rulings by both government agencies, with the next one being a preliminary ruling by the Commerce Department, expected today, to impose anti-dumping duties on the eight countries. "The Commerce Department will set the initial effective tariff levels before the final investigation is concluded early next year," Mr Madrecchi said. "That means increased costs will quickly impact the supply chain and U.S. manufacturers, not to mention consumers." With domestic producers unable to produce even some types of tinplate required by canners, and the canned food industry generally less profitable, the tariffs likely to be imposed by today's decision will inevitably be passed on to consumers.

Large rolls of tinplate like these are used to make food cans, and their price is about to skyrocket

While regulatory investigations must ignore the impact on downstream players, reality does not. "We're an important company in our region," said Woody Swink, co-president of McCall Farms, a South Carolina food canning company. "We're not a big consumer goods company, we're a family business. But it would hurt our business and could be devastating for our growers and other manufacturers who supply us. We estimate our costs could increase by as much as 30 percent."

That means consumer costs could increase by the same amount. Ironically, it could also damage the US government. "We have a great partnership with the USDA," Swink said. "They provide our products to food banks to feed hungry people. It's very unfortunate."

"In essence, this is the government taxing itself," Madretsky added.

But in the long run, higher domestic production prices are also likely to mean more imports and less American-made food. "We've already seen an increase in food imports from China because of the existing tariffs," Madereki said. A study commissioned by the CBA estimated that as many as 40,000 U.S. jobs would be at risk to protect 66 U.S. steel manufacturing jobs. The information released by Senator Joe Manchin, a West Virginia Democrat who supports the tariffs, said about 950 employees at the company's Cleveland-Cleves plant in Wilton, West Virginia, where it makes tinplate, were all at risk.

Mr Gregg said: "Steel tariffs will have the same impact as all other tariffs. They will raise costs for American companies that use steel. Based on past cases, this will lead to more job losses." "This is what happened during the Bush and Trump administrations, and it will happen if petitioners advance their departmental interests by receiving what amounts to another privilege from the federal government."

Cleveland Cleveland did not respond to a request for comment for this article. In a press release when the original petition was filed, Lorenzo Goncalves, chairman, president and CEO of Cleveland Cleveland, said: "Although the United States is the greenest steel producer, it remains the world's largest steel importer. As our documents show, unfairly priced tinplate imports that have flooded into the United States over the past two years have increased dramatically, and we cannot allow this to continue. As long as our US trade is normal, we welcome competition with any and all imported steel. The law is respected and we will use every tool at our disposal to rectify the situation."

There are two other tinplate manufacturers in the United States, the U.S. Steel Company and the Ohio Paint Company. Neither has taken a position on the petition.