Examining the Possible Effects of Trump's Steel and Aluminum Tariff's on McLean County

The upcoming Sky Zone Trampoline Facility continues steel work for their new addition at 300 McKnight Drive. (Image Credit: Matt Johnson)

The upcoming Sky Zone Trampoline Facility continues steel work for their new addition at 300 McKnight Drive. (Image Credit: Matt Johnson)

The Main Point: A blanket tariff on imported steel and aluminum shook the international markets earlier this month, but the local effects on Bloomington-Normal have yet to be fully revealed.

Rewind: On March 8, 2018, President Donald Trump imposed a 25% tariff on all imported steel and a 10% tariff on all imported aluminum. The move from the Trump Administration is in line with a campaign promise to enact measures that would boost steel production in the U.S. The tariffs are intended to be a counterweight against foreign producers of aluminum and steel, which Trump says flood the U.S. market. The tariffs mainly target China’s low-cost exports to the U.S.

The Trump administration believes the tariffs will result in the reopening and expansion of steel manufacturing in the U.S., offering more American jobs and selling more American-made steel.

Zach Dietmeier, Director of Marketing and Communications for the Bloomington-Normal Economic Development Council (EDC), said it was too early to tell what the major impacts of the tariffs could be for McLean County. The EDC has been working with the Illinois Manufacturer’s Association to analyze the full impact for the State of Illinois.

“The biggest expected impact would be carmakers,” Dietmeier said. “As far as steel and aluminum are concerned, that could factor in for Rivan Automotive when they begin production. Since they haven’t begun production yet, it may just be a projected cost for them.”

Rivian Automotive, an electric vehicle startup, bought the former Mitsubishi Motors North America plant in Normal. Rivian plans to produce its first vehicle this year. With a local plant producing vehicles, its suppliers are likely to flock to the area, brining in more products and jobs. If Rivan Automotive follows the path of other Midwest automakers, the price increases could be negligible, Dietmeier said.

According to an IHS Global Trade Atlas study, the leading importers of steel in the U.S. are Canada, Brazil, South Korea, Mexico and Russia. China accounts for 2.9% of all imported steel. President Trump granted exemptions from the tariffs to Canada and Mexico as part of the North American Free Trade Agreement (NAFTA).

The Data: Illinois is the second largest importer of steel in the U.S. Illinois purchases 41% of total steel imports from Brazil and 29% of total aluminum imports from China, according to a Brookings Institution report. The state average for percent total of steel imports is 2%; Illinois accounts for 2.7%, according to the Brookings report. A shift for Illinois steel importers to countries such as Canada and Mexico could mitigate the effect of prices increases, Dietmeir said.

One main concern for local residents is whether the increased costs will be passed to consumers in the form of higher prices. For example, customers of businesses such as Destihl Brewery, a company that cans its own beer, may begin to see higher prices at the tap.

“As far as impact, we are not a heavy manufacturing county,” Dietmeier said. “The manufacturers we brought in recently, Brandt and Rivian, may have a cost impact down the road especially as they are gearing up, but we do not have a timeline on that.”

McLean County has a labor force of roughly 93,200 with 3,500 total manufacturing jobs. The top employers in Bloomington-Normal are State Farm Insurance, Illinois State University and Country Financial. If the tariffs had an affect on insurance policies, this measure would have a major impact on the local community, Dietmeier said.

The EDC does not expect to see a decrease in construction or expansion in Bloomington-Normal resulting from the tariff. If a company wishes to build in McLean County, they are going to do it, said Dietmeier.

The tariffs have sparked concerns over retaliatory tariffs from countries including China, Canada and the European Union. Although they have yet to be enacted, such tariffs could have a definite impact on McLean County.

“With agriculture being our number one export in the county, tariffs on agricultural products could affect us. Those countries need [our product]. Whether [there is] a tariff or not, people are going to need that,” Dietmeier said.

Key Takeaway: Based on the current status of the tariffs, the local impact for McLean County could be negligible in terms of production, but resulting price increases for goods and services remains to be completely understood.