As More Tariffs Loom, Austin Companies Absorb Metal Price Hikes

Jun 20, 2018

President Donald Trump is threatening tariffs again, this time on more than $200 billion of goods from China. The administration earlier this year began taxing imports of a variety of products, including washing machines, lumber, steel and aluminum. While many of those tariffs won't be felt for some time, there are some Austin businesses already making adjustments.

Westbrook Metals has been dealing with price jumps ever since Trump made public his intention to put a tariff on metals a few months ago.

“When the tariffs were announced, we had an immediate uptick in price,” says Jak Fuller, Austin branch manager for Westbrook Metals. “Costs in general went up. So, we transferred those on to our customers immediately, since we base our prices off of market pricing.”

He said prices never stopped going up.

Jak Fuller says Westbrook customers were buying out of fear after President Trump announced a tariff on metal.
Credit Andrea Garcia for KUT

“People were buying out of fear,” he says. “They wanted to get as much as they could. They loaded up on material. We saw a big surge in just business, in general, and the costs just kept ticking up.”

Westbrook is a privately owned metal supplier, with branches in Austin, Round Rock, San Antonio and Dallas. It orders from larger mills, then sells to other businesses, like machine shops, oil and gas companies, fabricators, food trucks and breweries.

Its customers vary, and so do its suppliers' countries of origin. Fuller says mills send alloys from Canada, Mexico, India, Taiwan, South Korea and elsewhere. But with the tariffs, mills in the United States have the cheaper product – but just by a little – on purpose.

“They've raised their prices because they can,” he says. “They know that there is a tariff in effect, so the domestic mill raises, because why wouldn't you?”

Tariffs allow domestic producers to raise their prices on products, which theoretically allows them to reinvest profits into jobs and facilities.

“The tariff gives cover for all domestic producers to raise their price, up to the limit of the tariff,” says Peter Rodriguez, dean of the Jesse H. Jones Graduate School of Business at Rice University. “And in doing so, they become more profitable. They perhaps expand operations. That's the positive side.”

If so, that sounds good, right? The problem is the likely scenario of higher prices for everyone.

“The logic of a trade war is that everybody loses,” Rodriguez says. “It's not likely that we're going to see any victories on either side here.”

Ja-Mar Roofing in Buda has been putting metal roofs on Austin-area homes for a few decades now.

“Metal has been a very stable commodity for most of my time in the roofing business, as opposed to asphalt shingles, which have been very volatile,” its president, David Phillips, says.

His relationship with suppliers helped stave off some price shocks, but that time has run out.

“Our suppliers were holding their pricing for orders that were in place,” he says. “And then after certain dates, they were taking the increase on and passing it through to us.”

That means Ja-Mar has had to increase its prices. That's sometimes difficult to convey, Phillips said, so now he's redoubled his efforts with his sales staff.

“The investment has always been significant to put a metal roof on a home, but now we're trying to just really convey the benefits and the advantages of metal, so that price is a little more easily taken on,” he said.

Phillips is optimistic. He's ridden out price hikes with his other materials and believes the metal market will level off eventually.

Fuller is a little more cautious.

“The market is going to correct itself in some way, somehow,” he said. “And whether that is a reduction in manufacturing, which forces us to relook at these tariffs, or whether it's high prices for everything, so, we're just – I'm not sure exactly how that's going to pan out. I don't think anyone really knows. But it's going to be a little bit of a ride here.”