It is too early to tell exactly what the effects of President Donald Trump’s proposed tariffs on steel and aluminum will have on the office furniture industry as exactly who and what will face tariffs remains fluid. But it certainly has sparked the attention of an industry that uses a lot of the raw materials.
Though the details of the tariffs remain fluid, here is the basic plan Trump is proposing: 25 percent tariffs on steel and 10 percent on aluminum. Though that alone could potentially hurt manufacturers in the office furniture industry, the larger worry is that the tariffs could set off a trade war with allies and foes alike. And that could undermine the global trading system.
BIFMA sends letter to President Trump
A few industry leaders are speaking out on the tariff plan, urging President Trump to reconsider his actions. BIFMA acted quickly by sending the following letter to President Trump, authored by Executive Director Tom Reardon:
“BIFMA is the trade association representing business and institutional furniture manufacturers across North America. Since 1973, BIFMAʼs role has been to monitor the state of the industry, serve as a forum for member cooperation and collaboration, and sponsor the development and refinement of product standards.
“BIFMA projects that its member companies will experience a significant increase in steel and aluminum costs in 2019 as the result of the recently proposed tariffs and related inflation. BIFMA further projects the increased material cost will have a negative impact on market demand, likely leading to a net job loss in this sector.
“We encourage the Administration to reconsider the imposition of tariffs. Taxing goods and materials coming into the U.S. will likely result in retaliatory actions from other countries. We believe that diplomacy and trade negotiations are a preferable course of action to resolve trade imbalances as opposed to the implementation of tariffs.”
Trump made protecting American industry a keystone to his campaign in 2016. “It will be American steel that will fortify America’s crumbling bridges,” he said while campaigning. Steel is especially important in some swing states like Pennsylvania that helped get Trump elected. Steel employment has fallen from nearly 650,000 workers in the 1950s to about 140,000 today. Closed steel mills litter the Midwest and many producers believe that can be blamed on other countries “dumping” cheap steel into the U.S. market.
Steelcase disagrees on tariffs
Trump has placed a lot of blame on China and its government for subsidizing production of the metals in violation of global trade rules, which many analysts say has flooded the global market with low-cost product and sent prices plunging. U.S. producers believe this dumping should be met with tariffs or quotas.
Steelcase, the largest office furniture maker in the world, disagrees. Spokesperson Katie Woodruff responded to questions about the tariffs with the following response:
“Our initial assessment of the steel and aluminum tariffs the President has announced indicates negative and unintended consequences that run counter to the administration’s intention.
“While we do purchase the vast majority of our raw steel domestically, there is some material we require not available through U.S. suppliers. As a result, the company is likely to experience a negative financial impact on our raw material spending.
“Steelcase is committed to maintaining operational agility so it can adapt to global market change and ensure business continuity. As such, the company has been following this issue carefully – and making our voice heard through direct appeals to elected officials – since the U.S. Commerce Department began investigating potential steel and aluminum tariffs last year. In fact, we have been fighting to protect a particular type of steel used in our PolyVision products for more than two years – and won an exclusion from tariffs last year. We will again seek an exclusion for this steel to ensure we can protect our business.
“Steelcase strongly supports measures to ensure a fair and level playing field, and is willing to work with other companies and government officials to reach that goal. In this instance, and with these particular tariffs, we do not believe that will be the result.”
Tariffs didn´t stop industry decline in the past
While some might blame Trump for playing politics, he is not the only U.S. president — from either party — to impose tariffs on steel. Presidents Lyndon B. Johnson, Richard M. Nixon, Jimmy Carter, and Ronald Reagan applied either quotas—import limits—or price floors on steel. That does not mean any of them were correct. Economic studies have shown that these measures did little to stop the decline of the industry.
One need not go back that far to see examples of tariffs. The administrations of George W. Bush and Barack Obama both applied steel tariffs. Bush imposed broad tariffs of up to 30 percent on steel imports in 2002. These were meant to last three years but were withdrawn early, after the World Trade Organization (WTO) ruled against them. Some research has shown that these tariffs cost the U.S. economy as many as 200,000 jobs. Meanwhile, Obama applied tariffs of up to 522 percent on some Chinese steel in 2016.
Even though the office furniture industry is concerned about the long term effects of the tariffs, many large steel and aluminum producers are pleased. The American Iron and Steel Institute thanked Trump for “addressing the steel crisis,” and the second-largest American aluminum producer, Century Aluminum, said the measures will spur them to increase domestic investment.
However, most economists say that the tariffs are unlikely to help U.S. producers. They point to previous attempts to protect the steel industry that have failed to arrest the sector’s decline, and they say that innovation in the industry, not imports, are primarily to blame for lost jobs. Declining demand for steel is another major factor, with U.S. consumption falling almost in half since the 1970s.