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With tariffs on steel and aluminum set to take effect next month, economists say the costs of a wide range of items could go up as businesses pass those costs to consumers.
President Donald Trump’s tariffs of 25 per cent on steel and aluminum means those companies paying more as a result of the tariffs will try to “claw back” the increases, says economist Moshe Lander.“Anything then that involves steel and aluminum is going to hit us,” Lander said.“Think about all of the trucks, trains, bridges, factories, warehouses, distribution networks that use steel and aluminum in any part of that chain, that money then gets passed on.”A new note from the Royal Bank of Canada (RBC) on Tuesday cautions that while prices would rise, “likely not enough to have a significantly destablizing effect on the economy.” The question for many is, how much could costs go up — and on what?Steel and aluminum inputs that comprise many of a vehicle’s internal parts and auto body will sometimes cross the Canada-U.S. border multiple times before a finished vehicle rolls into a dealer’s lot.Those crossings, especially if retaliatory tariffs are applied like in 2018, could mean more costs to produce vehicles.“You can produce a sheet of steel in Hamilton, it can go across the border for three or four or five times before it lands in a car,” said Peter Warrian, a senior research fellow at the Munk School of Global Affairs and a steel economist.Erik Johnson, senior economist at BMO Capital Markets, told Global News on Monday that the average price of a new vehicle could rise US$400 to US$700 under the new trade restrictions. But if domestic U.S. producers raise their prices in response to the tariffs, that price could be closer to $1,000.In addition to the vehicles themselves, the Insurance Bureau of Canada said in an interview that as costs rise on things like cars and trucks, the cost of auto insurance claims will reflect those increases which is the biggest piece in an auto insurance premium.The same is true for many appliances, too.
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Whether it’s a fridge or coffee maker, you might see the price on your appliances increase due to the tariffs because of the steel and aluminum that goes into making it.“So many of these appliances are made in the States, come back across the border,” Warrian said. Warrian said steel can be produced in Hamilton, Ont., but then cross the border multiple times before it lands in a product and thus leads to an increase in cost.Manufacturing and construction could also see costs rise, with Warrian noting there’s steel in many newly-built homes, not only in the appliances but in the building itself.The Canadian Home Builders’ Association told Global News in a statement that the immediate impact from Trump’s tariffs on steel would likely not affect Canadian home-building prices right away, in part due to the lack of retaliatory duties by Canada.That could change if Canada retaliates.However, a spokesperson cautioned if the U.S. tariffs stay in place for some time, it could have “severe impacts” on some local economies and result in slower housing starts due to the impact on jobs and reduced consumer confidence.
While a soda or beer can might not be the first thing you think of with tariffs, the aluminum used to package them means that can of Coca-Cola could soon cost more, Lander said.“Basically the rule of thumb is, knock on it. If it makes a metal sound, it’s got aluminum and steel in it. If it makes a woody sound, then you might be free,” Lander said. “It can show up in such weird ways depending how long they (tariffs) last and how much it threatens Canadian businesses.”The items the tariffs could affect can range from a Hibachi set you use to a barbeque.In some cases, because of the costs associated with getting products to store, some products could still see price increases even if they don’t have steel or aluminum in them.“Even something as innocuous as a Tim Hortons doughnut might have a few cents worth of aluminum and steel embedded in it, not as an ingredient but part of getting doughnuts into the store,” Lander said.The tariffs on steel and aluminum won’t come into force until March 12, but Canadians may want to consider purchasing some items now to avoid the cost — but it depends on the item. If it’s a big ticket item like a fridge or other appliance, Lander said it may be worth buying it now, while things like a new watch that you don’t plan to buy for a couple of years can likely wait.Flavio Volpe, president of the Automotive Parts Manufacturers Association, said in an interview with Global News on Tuesday that if you’re planning to buy a vehicle, buy one now.“As we go through a trade war and a whole bunch of that car’s price will be inflated because of a surtax, either the one that they put on or the counters that we put on,” Volpe said.“What may happen is this is a short-term trade war, the price, the value of that car will collapse by the value of the tariff once the tariff has been removed.”—with files from Global News’ Craig Lord and Uday Rana
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