The price of aluminum went up about 10% after the United States government sanctioned businesses owned by Oleg Deripaska. This means that Americans are now generally forbidden from doing business with the aforementioned corporations. Other companies are quickly abandoning the same corporations to avoid being slapped with sanctions themselves.
The trouble is that Deripaska currently owns the company (Rusal) that produces 7% of the world’s aluminum. Rusal’s stocks have plummeted as a result of losing their American customers, who make up 15% of their sales. But the decrease of aluminum on the American market has the potential to drive up prices on other things.
New Import Tariffs
This is especially true when the sanctions are combined with 10% tariff on aluminum imports. After all, America doesn’t produce most of the aluminum that our country uses. Most of it comes from places like Russia, China, the United Arab Emirates and Canada. Of the four, Canada is the only country that’s currently exempt from the tariffs.
Another recent development has been the 25% import tax on steel. Only six countries and the EU are exempt from the rules. We get about 2/3 of our steel from four of those countries anyway, but they are all facing a limit to how much they can ultimately import. This is naturally a boon for American steel producers but not such a good thing for American companies who currently use imported metal to manufacture their products.
Possible Side Effects
Many economists are predicting a trade war as countries affected by the current laws find ways to retaliate. This could hurt or negate the economic growth that the tariffs were supposed to create by strengthening the American metals industry. In fact, more jobs could be lost if other nations decide to follow our lead and claim that they too must tax imports heavily to protect their home industries. They could additionally state that bringing in supplies from abroad is a security risk that must be penalized accordingly.
The present situation is not yet one that’s going to cause even the most die-hard soda drinkers or prospective car buyers to lose any sleep. Aluminum prices have traditionally fluctuated a great deal, which means that buyers have probably already taken such a scenario into account. But many different industries will be affected if the higher prices continue to stick around. After all, plenty of the items we use in our daily life contain aluminum or steel: canned goods, beverage cans, packaging materials, cars, tractors, and planes.
Luxury vehicle makers will be especially hard hit since they use more high-end metals than other car companies. But even brands like Ford and John Deere are worried about how these new regulations will impact their profitability in the next year. However, they aren’t the only ones citing increased costs if the price of aluminum goes up.
Even individuals who don’t plan on purchasing a car or tractor anytime in the near future could potentially be affected if the rising prices start to negatively affect the cost of food items like beer and tinned soup. After all, any additional charges that come about as the result of the new tariffs will probably be passed on to the consumers so that companies can maintain their profits.
What is Negligible Impact?
Of course, representatives from the American government have claimed the overall impact of the current tariffs will be negligible. (One source says consumers are perhaps looking at an extra $300 per vehicle as a result of the new regulations.) Yet a person’s definition of a "negligible" amount is related to their salary and the full impacts of these new taxes have yet to be seen.
For some folks, any increase could mean the difference between buying a new car or having to make do with the old one a bit longer. Besides, buying food comes first and humans cannot live by bread alone. We’re rather partial to our soup, soda, and beer.
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