Businesses are passing along tariff costs, Fed reports

Who would have thought..

 

I deal with aluminum LME, what is steel through?

 

We saw this coming so we bought as much steel as we could possibly store from Cleveland Cliffs and others the first couple weeks of January before Trump’s inauguration. We’re going to have to buy steel again in Q3 unfortunately, even if only a relatively small amount.

 

Not sure what you mean? A company like Cleveland Cliffs is completely vertically integrated.

There’s the CRU that will tell you prices for rolled steel. We are a big enough player we never pay those prices since we negotiate big buys, but it gives you pretty good cost data.

 

I guess cru might be what I’m talking about then. We buy from several different anluminum extruders. It’s all based on LME or Midwest plus conversion. The LME is what it is, the conversion rate is what seperates them. I wasn’t sure how steel works. It would seem kind of vague to say aluminum went up x amount. That’s just not how it works. Wasn’t sure about steel.

 

Steel has been protected for 150 years under the commie arg of "national security". 1-3% of domestic steel is used by the military. Oh, & the military grade steel bought mostly from 2 plants in Penn is protected (as it prob should be) by the Defense Production Act.

Stupid ass policy - & we should all be in agreement. I will say Trump "allowing" the Nippon deal to go through - a total no-brainer - is a good thing. the fact that a president could stop it is gross!

I used to recall when fake conservatives at least but a tad of value on freedom. Now it's security, security, security. As if free(ish) mkts haven't been primary driver of security.

 

Agree with that, as well.

 

The company we just sold at the start of the year bought tens of millions of pounds of aluminum from Korean extruders annually. We always negotiated prices with them. I don’t think the LME was ever used directly for pricing but as an argument to say they could get it cheaper. Part of why we didn’t use the LME directly is that we bought not just extruded profiles but had them fabricated and painted too so the price per pound included labor too.

 

We are in that ballpark as far as volume, we just buy mostly domestic and powder it in house. I guess my point was that the only thing that separates any extruder is their conversion rate. It’s just added on top of the LME and Midwest. That’s the number you pay. Aluminum got tariffs just like steel did but it’s not like it just went up 25 percent. That’s not how it works. It’s a traded commodity

 

Yeah, steel is the same way. If you look at the steel index the price literally shot up the week Trump was inaugurated before any tariffs were enacted. It’s off its recent highs right now though. I literally just received an update on the CRU and in the last week galv is down .9% and hot rolled coil up .1%. Both peaked in March, have fallen probably 15% since, and have been relatively steady since the start of June.

 

Disagree with the policy all you want (I happen to as well), but it's actually quite the opposite of "hating America". The tariffs are doing precisely what tariffs were designed to do. Push the behavior of American consumers away from foreign imports to domestic products by increasing prices of those foreign imports. Of course businesses were going to pass the increase to its customers. That's basic economics. It's a similar scenario as with minimum wage. When the government adds a price control of some sort, it flows down to all levels of consumption.

 

Again, I'm not arguing the policy. Personally, I think gov't intervention in what is supposed to be a free market is a recipe for disaster. I won't argue (I agree) that the execution of it has been haphazard and lousy. But poor execution does not equate to hating America. By that logic, more than half the teams in the NCAA are hated by their coaches because their execution is poor.

 

That is largely untrue. You make a poor assumption in that calculation: that the tariff is calculated only on the initial price. Let me give you a simple example: Let's say that a product costs $100 before a 20% tariff. Then you put the tariff on and the price rises to $120 (100% passthrough as this is a simple example). Now, the next year, the price of the product increases by 3% due to higher input prices, making it $103 before the tariff. The tariff is now on that $103, not $100. So the price would have been $103 without the tariff, but is now $123.60 (as that $0.60 will pay for the additional tariff). The percentage change is the same, but the actual dollar figure increase is higher than it would have been without the tariff.

 

In any case, Trump is passing the inflationary price increase onto the American consumer ....... at the same time he is giving gave mostly rich people like himself $4.5 trillion in largely deficit-funded tax cuts.

That guy is really looking to help the American people!

(It's actually shocking that such flagrant and selfish disregard for Americans and their welfare isn't called out more directly.)

 

I'm think I'm getting a little wrapped around the axle on some of the terminology here and y'all seem to have a better handle on the concept. Help me understand why this would be "inflationary"? Isn't that more a descriptive of the value of money rather than just simply the price increase/decrease in purchasing a good or service? What I'm asking here is what's the difference between a price increase from $100 to $120 of a good/service because of its value as opposed to the same increase because the fiat behind the value of money changes?