In response to President Trump’s June 1st announcement that key U.S. trade partners would be subject to tariffs on steel and aluminum, Canada, Mexico and the European Union announced retaliatory tariffs on U.S. exports. Each of these partners is an important export destination for Utah and, combined, account for 50% of Utah’s total exports in 2017.
Retaliatory tariffs will harm a wide range of Utah’s industries, including manufacturing of iron & steel, aluminum, electrical equipment and machinery. In total, retaliatory tariffs threaten $114 million in value-added exports to these three partners and will depress agricultural commodity markets in Utah and the U.S.
“With the steel and aluminum tariffs now in effect, they are beginning to tarnish the relationships we have with some of our top trade allies,” said Derek Miller, president and CEO of World Trade Center Utah. “In addition to the strain placed on Utah companies, consumers will also feel the consequences of the retaliation as they begin paying higher prices for goods.”
Utah’s iron & steel industry will bear the largest impact of the new tariffs. Utah exported $128 million in iron and steel across the world in 2017. Nearly 65% was exported to Canada, and another 10% went to Mexico. Combined with the European Union, close to 80% of Utah’s iron & steel exports are accounted for by these three partners. Retaliatory tariffs threaten over $27 million, more than 20% of Utah’s total iron & steel exports.
Additionally, these tariffs threaten 16% of Utah’s $68 million in aluminum exports, 22% of Utah’s $55 million in electrical equipment exports, 5% of Utah’s $363 million in soaps, cleaning compounds & related products exports, 5.5% of Utah’s $175 million in general machinery exports and 4% of Utah’s $163 million in plastics exports.
Utah’s agriculture, food and dairy products will also be subject to these tariffs, including nearly $2 million in pork products, $500,000 in cheese exports to Mexico and millions in other food products such as sauces & seasonings, baked goods, sugar confections and chocolate.
The European Union also announced new tariffs of 10% to 25% on essential oils and makeup products. These tariffs threaten $2.6 million in essential oils exports to the European Union and over $9 million in lip, eye and powder make-ups as well as manicure preparations.
Depressed Commodity Markets
As a result of the decreased demand for U.S. goods in Canada, Mexico and the EU, it’s likely that markets will have to compensate for increased domestic supply, causing prices for the above commodities to fall. Additionally, non-exporting Utah companies are at risk of depressed prices when selling or producing other agricultural goods, including various jams and jellies, corn and other cereals, rice, beans, cucumbers and other vegetables. Tariffs on agriculture and dairy products are especially harmful to Utah’s rural economy.