New restrictions could force pump companies to change their way of business
by Drew Champlin
March 13, 2018

On March 8, U.S. President Donald Trump announced that he is imposing import tariffs of 25 percent on steel and 10 percent on aluminum, with the argument that the tariffs are vital to bringing down the United States’ trade deficit.

Steel and aluminum are key components of the pump industry, and experts say the tariffs are expected to have a big impact. President Trump excluded Canada and Mexico from the tariffs at this time, but also said other countries could receive exemptions.

The tariffs are scheduled to go into effect on March 23, and pump industry leaders are reacting to the news.

“My first reaction was to try to determine what countries will be exempt, such as Canada and Mexico,” said Flowrox president and CEO of North America operations Todd Loudin. “Will there be more countries that will be given exemptions? Also, the bigger concern on a larger scale is what will other countries do in retaliation? This appears to be an action directed at China and Asia, but only about 10 percent of U.S. steel imports come from China.”

China “strongly opposed” Trump’s restrictions, and Japan said his actions were regrettable, per CNBC.

The tariffs will challenge the pump industry since the majority of pump construction is made of steel, Loudin said. He added that many pump manufacturers source their castings outside of the U.S., “so it definitely will have a negative impact.”

“Prices will need to increase or profitability will be negatively impacted,” Loudin said. “Some of us may choose to shift purchasing to secure castings and components in U.S., Canada or Mexico.”

Thomas L. Angle of Swiss Flow Solutions GmbH believes that the biggest effect to the pump industry will be from a production cost standpoint that will be determined by what, exactly, the tariffs cover. The impact on production cost could be low if it’s only rolled products and bar stock, but higher if it is raw pellets, scrap metal and other materials used in the casting process, Angle said.

The tariffs may make certain pump manufacturers less attractive or competitive compared to foreign brands, Loudin said. Angle believes that people in the industry should start looking at domestic supply sources.

It’s still too early to tell what will happen. Loudin thinks understanding the ramifications will take time. But the move could have some lasting implications.

“The real danger in this whole thing is the threat of a trade war, which will make U.S.-produced products more expensive in any place that retaliates,” Angle said. “The effects of this will definitely be significant for U.S.-produced pumps.”

Countries could challenge the tariffs at the World Trade Organization, per Politico, saying they violate trade laws. This could mean retaliation by other countries with their own tariffs or trade restrictions.

Another ramification, according to this Politico article, is that medium to smaller-sized companies may be forced to outsource jobs.

Much can happen between now and when the tariffs go into effect, and especially after. Stay tuned to Pumps & Systems as we continue to cover this issue.