Oct 11, 2023

Tariffs Up To 300% On Steel For Tin Cans Will Likely Hit Consumers

All your food products that come in cans like these are about to get more costly because of new ... [+] steel tariffs.

Has inflation got you down when you go grocery shopping? Well, get ready for even higher food prices, at least for your canned goods. That will be one of several inevitable negative effects of the coming tariffs on tinplate steel.

Ohio-based steelmaker Cleveland-Cliffs Inc. and the United Steelworkers union joined forces in January to file petitions for anti-dumping duties against eight countries, and countervailing duties against China, for allegedly selling tinplate steel (also called tin mill steel, a thin steel sheet coated in tin used primarily in cans for food packaging) in the U.S. at below-market prices, and in China’s case for the government subsidizing production. (Unusually, that’s a small piece of this puzzle; unlike so many areas of manufacturing, in tinplate, China is a smaller player, accounting in 2021 for only a little over 10% of the total imports from the eight countries named in this action.) The potential tariffs could be as high as 300%.

“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.”

It’s certainly not a stretch to believe that China might be up to no good in the tinplate trade, given that country’s overall track record as a trading partner. But the other seven countries are Canada, Germany, the Netherlands, the United Kingdom, Korea, Taiwan and Turkey. That all those nations are colluding to undermine American steelmakers is just a bit tougher to sell, with the group including some of America’s staunchest allies and strongest trading partners.

"All tariffs are ultimately about making the rest of the country pay for favors dispensed by the Federal government to a more narrow sectoral interest,” said Samuel Gregg, distinguished fellow in political economy and senior research faculty at the American Institute For Economic Research, whose recent book, The Next American Economy: Nation, State, and Markets in an Uncertain World, made a strong case against tariffs and protectionism. “This particular case fits that bill exactly.”

“The tariffs will hurt can makers and end users,” said Thomas Madrecki, vice president of supply chain at Consumer Brands Association, an industry advocacy for U.S. CPG businesses. “They’ll make can making and food manufacturing less competitive in the U.S., and significantly reduce consumer buying power. This is not the time to be considering such petitions.”

But that viewpoint doesn’t matter. Once put into motion, such petitions follow a definitive investigative course through the Commerce Department and the U.S. International Trade Commission—one that, by design, is not allowed to consider the effects on downstream users or consumers. “These allegations go through a specific process that’s been shaped by years of lobbying,” said Madrecki. “The AC/CVD laws statutorily prohibit considering the impact on consumers.”

Predictably, then, the petitions have advanced steadily this year through several rounds of determinations by the two government bodies, with the next being the preliminary determination by the Commerce Department on the antidumping duties against the eight countries, expected today. “Commerce will be setting tariff levels that go into effect on this preliminary basis, before the final investigation wraps up early next year,” Madrecki said. “That means cost increases will soon hit supply chains and U.S. manufacturers–not to mention consumers.” With domestic producers not even making some of the types of tinplate required by can manufacturers, and with the generally thin margins across the canned food industry, 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 the investigation by statute must ignore the effects on downstream players, though, reality won’t. “We’re a significant company in our area,” said Woody Swink, co-president of McCall Farms, a South Carolina food canning company. “We’re not a big CPG, we’re a family-owned business. But this will hurt our business, and it could be devastating to our growers and to other manufacturers who supply us. We estimate that our costs could go up by as much as 30%.”

That means consumer costs could rise by the same amount. Ironically, that could also hurt the U.S. government. “We have a good partnership with the U.S. Department of Agriculture,” said Swink. “They supply our product to food banks to feed hungry people. This would be really unfortunate.”

“In essence, it’s the government taxing itself,” added Madrecki.

But in the longer term, higher prices for domestic production also very likely mean more imports and less made-in-America food. “We’re already seeing an increase in imports of food from China because of the existing tariffs,” Madrecki said. A study commissioned by the CBA estimates that as many as 40,000 American jobs will be put at risk to protect 66 jobs in U.S. steelmaking. Information released by senator Joe Manchin (D, WV), who supports the tariffs, cited the entire workforce of about 950 as at risk at the Cleveland-Cliffs facility in Weirton, West Virginia, where the company produces its tinplate.

"Steel tariffs will have the same effects as all other tariffs,” said Gregg. “They will drive up the costs incurred by American companies that use steel. Based on past cases, that will result in job losses in the many more companies that are steel-using industries than in the steel industry itself. That's what happened during the Bush and Trump administrations and that is what will happen should the petitioners advance their sectoral interests by getting what amounts to yet another privilege from the Federal government."

Cleveland-Cliffs did not respond to a request for their input for this article. In a press release when the original petitions were filed, Lourenco Goncalves, Cleveland-Cliffs' chairman, president and chief executive officer stated, "The United States is still the largest importer of steel in the world, despite being the most environmentally friendly steel producing nation. As our filing shows, there has been a significant surge in unfairly priced tinplate imports flooding the United States over the past two years, and we cannot let this persist. We welcome competition with any and all imported steel as long as our U.S. trade laws are respected, and we will use all the tools at our disposal to remedy the situation.”

There are two other U.S. manufacturers of tinplate steel, U.S. Steel Corporation and Ohio Coatings company. Neither has taken a position on the petitions.

This article has been updated with a statement from the United Steelworkers.