U.S. President Donald Trump speaks to members of the media on the South Lawn of the White House in Washington, D.C., U.S. (Photographer: Olivier Douliery/Pool via Bloomberg)

Within Hours, Trump Tariffs Force Firms to Confront New Threats

(Bloomberg) -- As the clock passed midnight on Friday morning, Pierre Labat’s job got a lot tougher.

Labat is vice president of global automotive at Atlanta-based Novelis Inc., a maker of flat-rolled aluminum products. Metal tariffs on Canadian, Mexican and European Union imports announced Thursday morning took effect just 15 hours later, a once-unthinkable action that swiftly created winners and losers.

Buyers such as Novelis felt the pain at 12:01 a.m. New York time, as U.S. Customs and Border Protection started applying the tariffs at ports and land crossings.

Shipping costs on aluminum already are rising and will be passed through to customers. The price to ship aluminum to the U.S. Midwest has risen 125 percent in 2018 amid speculation that the U.S. would put up trade barriers.

In the early hours of the new tariff regime, an unintended consequence for Novelis was starting to become a reality for Labat to consider: that high tariffs will encourage consumers to find alternatives to steel and aluminum.

“It could potentially down the road reduce the competitiveness of aluminum as the material of choice for our customers, for the automotive and specialties markets,” Labat said by phone.

Industry Boost

President Donald Trump made it clear that he’s willing to punish even friendly trading partners with the 10 percent tariff on aluminum and 25 percent tariff on steel to protect domestic manufacturers. His administration blames a flood of cheap production from China and elsewhere for putting American industry out of business.

An early winner is Steve Conboy, a 45-year veteran in the construction industry and the general manager of M-Fire Suppression Inc., which treats construction lumber to protect against fires. He says his company is already seeing more attention to building affordable housing with lumber as a substitute for steel. The wood, called cross-laminated timber, has the strength to be built as high as skyscrapers, Conboy said.

“Tariffs are going to push this into the housing market to make affordable housing with wood,” Conboy said in an interview. “Can you imagine seeing buildings as tall as the Empire State Building with wood? Ha!”

The duties immediately provoked retaliation by allies as Canada’s government announced it will impose tariffs on as much as $12.8 billion of U.S. steel, aluminum and other products from July 1. The European Union said it would take swift counter-measures, and Mexico vowed to impose duties on everything from U.S. steel to pork legs and cheese.

The U.S. officials responsible for the new policy say the early disruptions should subside.

“These are blips on the radar screen,” Commerce Secretary Wilbur Ross said Thursday in a CNBC interview. “Everybody has spats every now and again. Every family does, every country does with others. There’s nothing weird about that. I think everybody will get over this in due course.”

©2018 Bloomberg L.P.

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