March 8, 2018

Will A Steel Tariff Impact Your Food Business?

Steel and food – perhaps it’s not the most automatic connection on your mind, but after the Trump administration announced tariffs on steel and aluminum last week, many in the food industry began to worry.

First and foremost, keep in mind that much of the concern right now is that the tariffs have been announced but there are no specifics that anyone has to work with yet. Which countries may be impacted by the tariffs and how much of that steel/aluminum is imported is not yet known. Manufacturers aren’t keen on the ‘unknown’ factor right now.

However, a few calls to packaging companies that primarily serve food businesses found that many are worried that the tariffs could impact the cost of food packaging. The resounding takeaway was ‘we just don’t know what’s going to happen.’

An article in the Wall Street Journal quoted the chief executive from food packaging manufacturer Ball Corporation as saying that the uncertainty of what is going to be impacted “has many people concerned.”

In another article by Reuters, John Mothersole, a director of research at IHS Markit, estimates that prices on aluminum cans could increase 6.7%. These types of projections leaves food manufacturers wondering if they should allow – and can afford – to have these price increases eat into their profit or if the added cost should be passed along to consumers. You can bet there are a number of analysts assigned to trying to figure that out right now at big consumer packaged goods companies across the country.

In further research, I found an article from June 2017 about a letter that Canned Food Industry had sent to the Trump administration asking that tinplate steel be excluded from any proposed tariffs. The concern, as outlined in the letter, was that US-based tinplate steel manufacturers cannot meet the demand for the 20 billion cans needed annually. Whether or not this type of steel will ultimately be excluded remains to be seen.

As a note, you may be reading this and thinking that because you don’t package your products in an aluminum or steel container that you may not be impacted by this. Keep in mind that any ingredients you use that come to you packaged in steel or aluminum could increase their prices to you in order to offset any packaging cost on their end. So simply because you don’t packaging your products in a can, for example, doesn’t mean you may not be impacted by this as well.

Obviously, a lot remains to be seen but it does appear as though there could be a large impact on the food industry depending on which way this whole thing shakes out.