The debate over tariffs and the potential effect import duties could have is raging among U.S. investors, strategists and economists, but there are a pair of product categories in particular that the debate has converged around.
Last week, President Donald Trump unexpectedly announced that he would be instituting tariffs on both steel and aluminum imports. That spurred a flurry of analysis over what products could be hurt by such a policy—even setting aside the potential retaliation by trading partners—and in large part it centered on two: aluminum cans, used notably in packing food products, and steel-heavy cars.
Both products were seen as likely to be under pressure by tariffs, although analysts differed on the severity of the possible effects.
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Paul Christopher, the head of global market strategy at the Wells Fargo Investment Institute, suggested that the resulting increase in prices, or inflation, from tariffs might be minimal. He said companies can hedge their exposure to spikes in the price of commodities like steel and aluminum, and that they can benefit from new technologies and techniques that might decrease the use of those raw materials.
“New techniques make a beer can wall no thicker than a human hair (and at a cost of around 10 cents),” he wrote in a research note. “The tariff’s production cost impact may be only an extra penny per can.”
The comments echoed a statement by Commerce Secretary Wilbur Ross, who last week called the tariffs “no big deal,” citing what he implied was the de minimis increase in the costs of the price of a can of Campbell’s CPB, +0.87% soup. Per his estimation, tariffs would add just six-tenths of 1 cent to a can.
However, companies disputed that the impact would be modest. MillerCoors tweeted that “American works and American consumers will suffer as a result of this misguided tariff,” while a spokesperson for Anheuser-Busch BUD, +0.99% told MarketWatch that the aluminum tariff “will likely cost U.S. brewers millions of dollars.” Campbell Soup, in a statement to CNBC, said that “any new broad-based tariffs. will result in higher prices,” although it didn’t say how much prices could rise by. In a research report, Credit Suisse said the soup company would be among the food companies most affected by any tariffs.
Read more: Yes, a can of Coke will cost more under Trump’s steel tariffs
Cars are another product category whose prospects are being re-examined in light of last week’s tariff announcement. Wells Fargo’s Christopher said “a two-ton automobile may be roughly 50%-70% steel, and at current steel prices, some estimates suggest a car price may rise by $150-$200” under the new trade policy. He doesn’t view this rise as a game-changing event, and added that the positive impact of the recently pass tax-reform bill “should still exceed the lost competitiveness from the tariffs.”
While an extra $200 may not break the bank for a consumer in the market for a new car, the effect could be more severe for the automakers themselves. Goldman Sachs forecast that both General Motors Co. and Ford Motor Co. would each take a $1 billion profit hit if the steel tariffs advance. Such a headwind would reduce their adjusted 2017 operating income by 12% and 7%, respectively.
Read: Goldman slams Trump’s tariff plan: It would make the U.S. ‘less competitive’
Other companies that use heavy amounts of steel, including 3M Co. MMM, +0.37% and Boeing Co. BA, -1.09% were also seen as having an outsize effect from tariffs because they could be vulnerable to retaliation from U.S. trading partners.
Chris Higgins, an analyst at Morningstar, estimated “no material impact on Boeing’s costs from tariffs,” noting the plane maker had only “minimal” exposure to steel (the metal accounts for about 10% of the weight of new aircraft models). However, “Investors should be concerned about a trade war” because of Boeing’s global footprint.
“Retaliation from China, which accounted for more than 25% of 2017 total deliveries and represents an estimated 20% of Boeing’s backlog in unit terms, remains the most significant threat,” he wrote.