A 25% increase in tariffs on products made in China that are “in strategic sectors,” specifically, “certain steel and aluminum products,” has split trade experts, and an industry association, on the possible impact of those increased tariffs on industries dependent on products made from steel and aluminum.

On May 14, the Office of the U.S. Trade Representative (USTR) issued its review of tariffs on goods and products made in China as directed under section 301 of the Trade Act of 1974, and in announcing its review USTR noted that “products currently subject to section 301 duties should remain subject to the additional duties.”

Also on May 14, President Joe Biden announced he is directing the USTR to increase tariffs on $18 billion of imports from China, saying the increase in tariffs is to counteract “unfair trade practices” by China that include “flooding global markets with artificially low-priced exports.”

The review is titled: “Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices related to Technology, Transfer, Intellectual Property and Innovation”, and it contains a section called “Appendix K: Tariff Lines Proposed for Inclusion in Machinery Exclusion Process.” Appendix K lists the following steel and aluminum products made in China:

  • 8418.69.00 - Refrigerating or freezing equipment (not elsewhere specified or included: nesoi)
  • 8419.50.00 - Brazed aluminum plate-fin heat exchangers
  • 8419.50.00 - Heat exchange units (nesoi)

Increases in tariffs on those products has the heating, ventilation, air conditioning, and refrigeration (HVACR) sector concerned because “many components and materials contractors use every day are sourced from China,” said the Air Conditioning Contractors of America Association (ACCA) said in a statement to ACHR News. The news tariffs “will have a considerable impact” on HVACR small business owners, says the ACCA statement, which also says, the ACCA has “two major concerns regarding how this will impact the industry.” They are:

  • Increased costs: The tariffs will likely lead to higher costs for HVACR equipment and components given that many of these items are imported from China. This will result in increased prices for contractors and, ultimately, consumers who are already feeling increased costs due to inflation.
  • Supply chain disruptions: Contractors may face supply chain disruptions as they seek alternative sources for materials that are now subject to tariffs. This could delay projects and increase operational challenges, particularly during the busiest season of the year for the HVACR industry.”

While the ACCA “appreciate the efforts to prioritize products that are manufactured on American soil, these new tariffs will undoubtedly create additional cost and supply chain issues for contractors,” the statement said.

In addition, on May 23, the U.S.–China Economic and Security Review Commission held a hearing in Washington, D.C. to discuss—in part—“U.S. Trade Strategy to Address China’s Nonmarket Practices.” Three trade experts testified before the Commission about the U.S. trade strategy with China, and each told ACHR News what the possible impacts on the HVACR sector would be because of the increased tariffs.

Mary Lovely, a fellow at the Peterson Institute for International Economics, said the increased tariffs probably will not have much of an impact on the HVACR sector, because the U.S. imports “very little steel and aluminum from China.”

The U.S. “already has a lot of protection on steel and aluminum,” and “small amounts are coming (into the U.S.) from China because of countervailing duties and antidumping duties.”

However, Davin Chor, Associate Professor of Business Administration and Globalization Chair at Dartmouth College, disagrees, saying, the increased tariffs are going to raise production costs for those who use steel and aluminum products imported from China.

“U.S. companies will do whatever they need to…whatever is necessary to procure the inputs they need,” Chor said, adding, “research suggests that a lot of the tariffs that were placed on inputs that U.S. companies were previously getting from China has actually raised production costs.”

Jamieson Greer, a lawyer who specializes in internal trade, said China is already subject to “a number of tariff measures,” and the additional tariffs probably will not be “roiling global markets for steel and related commodities.”

In addition, U.S. industrial sectors that use steel are going to want “a secure, reliable supply chain, and not one that’s disrupted by geopolitics,” said Greer, who added a supply chain that is “dependent on an import relationship with Communist China, that’s a pretty high-risk proposition.” Click here to read the White House statement on the tariffs.