The doubling of tariffs on steel and aluminium by US President Donald Trump will only serve to push brands towards the more affordable substrates of glass and plastic, analysts have warned.
Trump said that he was planning to increase tariffs on imported steel and aluminium to 50% from 25%, beginning Wednesday 4 June, placing further pressure on steel producers.
“We are going to be imposing a 25% increase,” he announced at a rally in Pennsylvania. “We’re going to bring it from 25% to 50% – the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States.”
Morgan Stanley analysts Stefan Diaz and Angel Castillo said the increase in the aluminium tariff does not change their favourable view of the global beverage can industry given investors’ already muted expectations of the North American volume outlook, however, they added:
“This latest announcement, if implemented, would further close the cost advantage versus glass and increase the cost disadvantage versus plastic, thus raising concerns of substrate switching.”
Robert Budway, president of the Can Manufacturers Institute (CMI), said the tariffs on tinplate will negatively impact US consumers and increase the cost of canned foods made in America.
“The Can Manufacturers Institute supports President Trump’s decision to allow the combination [merger] of US Steel and Nippon Steel, but we strongly oppose any action that would raise steel tariffs to 50%.
“Doubling the steel tariff will further increase the cost of canned goods at the grocery store. This cost is levied upon millions of American families relying on canned foods picked and packed by US farmers and canmakers.”
Budway added that a series of “unfortunate decisions” over the past eight years by domestic tin mills led to dramatic cuts that have decreased US production of the specialised steel used in canmaking by 75%.
“As a result, domestic canmakers and canned food producers now import nearly 80% of tin mill steel from trade allies,” he continued. “Doubling steel tariffs will inflate domestic canned food prices, and it plays into the hands of China and other foreign canned food producers, which are more than happy to undercut American farmers and food producers.”
