Fastener Industry Braces for Price Hikes—What You Need to Know

A major economic story of 2018 has been the tariffs the White House has imposed on other nations and the resulting trade war from tariffs being imposed back on the United States. Initially, tariffs on steel and aluminum did not apply to materials produced in Canada, Mexico, and the European Union, but as the trade war has escalated, those markets’ imports now are subject to tariffs as well—25 percent on steel, 10 percent on aluminum.

These tariffs have been met with open arms by the U.S. steel and aluminum industries, who have seen increased demand for their products. However, manufacturers that rely on imported steel and aluminum are seeing their production costs soar and, subsequently, are passing that cost on to consumers. And in worst-case scenarios, companies are in danger of shutting down because they can’t secure the domestic steel they need to effectively operate.

The fastener industry has not been immune to the tariffs’ effects, so anyone who requires fasteners in their business is among those impacted. As a fastener purchaser, here’s what you need to know about price hike the industry is facing.

Tariffs’ Toll

The idea of buying domestic raw materials over foreign is worthwhile, but American output wasn’t ready for the demand the tariffs created. The options for manufacturers relying on steel and aluminum are curtailing production or paying more for the necessary raw materials. The specter of the problem was enough for Kenneth J. McCreight, the managing director of the Industrial Fasteners Institute, to pen a letter urging President Trump to reconsider the tariffs—and that was before Canada and Mexico were added to the order.

Inevitably, the struggle that American fastener manufacturers are trying to navigate results in price hikes in order to keep production up and costs in check. Some companies have already increased prices, but also face a double whammy in that retaliatory tariffs make their fasteners more expensive in foreign markets. It’s no wonder, then, that Forbes listed the fastener industry among the hardest hit by the steel and aluminum tariffs.

Downstream Costs

Your business needs fasteners, and any price hike is going to be tough to absorb. Going with European fasteners might seem to a be a good alternative, but unfortunately, those products might be coming from a country that is part of this trade war and, thus, subject to tariffs. The next round of tariffs aimed at China is slated to include materials that affect fasteners, so that might disappear as a cost-effective option, as well. It’s a definite damned-if-you-do, damned-if-you-don’t situation—steel and aluminum tariffs are making fasteners, both domestic and foreign, more expensive and cutting into profits downstream. Do you risk raising costs to compensate? What if your preferred fastener manufacturer cuts production and leaves you in the lurch? And what happens if your product is subject to overseas tariffs, potentially cutting into sales?

Unfortunately, there are no easy answers. In 2002, President Bush imposed steel tariffs that were so unpopular and ineffective, they were rescinded in 18 months. It remains to be seen whether the current administration will rescind this round of tariffs. Meanwhile, American manufacturers are requesting exclusions from the tariffs, but the outcome of those requests—some 20,000 of them—remains uncertain.

Staying Stocked

Amid all the chaos of the steel and aluminum tariffs and their subsequent effect on the fastener industry, the businesses that require fasteners to operate must adjust to potential price increases and supply issues. Whatever the future brings with this controversy, one aspect of your fastener strategy can and should stay consistent: working with a top-notch fastener distributor. The best partners can guide you through the various price adjustments, provide alternatives if your preferred fastener is suddenly unavailable or too expensive, and keep you informed of manufacturer news that concerns your stock. The current fastener market may be in a state of flux, but that doesn’t mean you have to get caught up in the chaos.