OpinionTrending Commentary

Will Prices for Canned Food Spike?

Dear Rest of America

Question: What could China, Germany and Canada possibly have in common?

Answer: In mid-August, the Biden administration announced new tariffs on metals for producing cans imported from the abovementioned countries.

Justification: According to a press release from the U.S. Department of Commerce, steel imports from the three countries are “being unfairly priced, i.e., dumped, into the U.S. market,” thus prompting raised preliminary anti-dumping duties.

Reaction: As a result, food companies have expressed that this move could lead to higher prices for some canned foods here in the United States.

During an investigation, all three trading partners were found to be selling tin mill steel at prices below those in their home markets.

Such metals imported from China would be subject to 122.52 percent of their import value—the highest tariffs of all three identified countries. The Department of Commerce (DOC) will also impose preliminary duties on similar imports from steel producers in Germany, including 7.02 percent for Thyssenkrupp Rasselstein and Canada, including 5.29 percent for ArcelorMittal Dofasco.

According to an administration official from the DOC, China’s import rates were highest due to a lack of cooperation from a major manufacturer, whereas other companies could not demonstrate that they were independent from the Chinese government under the Chinese Communist Party (CCP.)

While the preliminary tariff rates will take effect given a final ruling in January 2024, the DOC will not impose duties on the silver metal—often used in long shelf-life food cans, aerosol and paint—imported from the Netherlands, South Korea, Taiwan, Turkey and the U.K.

Essentially, companies from economies such as China are assumed to be owned by the state and selling products in the U.S. at market prices distorted by CCP subsidies—unless those companies can prove differently.

Notably, the five countries that evaded higher tariffs account for approximately half of U.S. tin mill steel imports. In contrast, China currently accounts for 14 percent while Germany and Canada together make up roughly 30 percent.

Considering that food prices have surged upwards due to inflation, food manufacturers have argued that the new tariffs will lead to even more elevated prices for long shelf-life products widely stored for emergencies, including canned meat, beans, vegetables and soup.

In May, the Consumer Brands Association, a trade group representing companies such as Hormel Foods, Fresh Del Monte Produce and Campbell Soup, estimated that new levies could lead to a 19 to 30 percent increase in canned food costs.

In January, the U.S. International Trade Commission (USITC), which is described as an “independent, nonpartisan, quasi-judicial federal agency,” and the DOC launched the investigation in response to a petition from the United Steelworkers union and Ohio-based Cleveland-Cliffs Inc.

According to a January press release by Cleveland-Cliffs, “dumped and subsidized imports” from the initial eight targeted countries had “taken sales from the domestic industry and made it impossible to obtain a fair rate of return on domestic operations, putting the future of American made tin mill products at risk.”

Cleveland-Cliffs describes itself as “the largest flat-rolled steel producer in North America” and ranked in the top 200 on Fortune 500 list for 2022.

Interestingly, it was reported in mid-August that United States Steel Corp. had rejected a $7.3 billion buyout proposal from Cleveland Cliffs, citing the bid as “unreasonable.”

The Ohio-based rival’s proposal came after the Pittsburgh-based steel producer reported its fifth consecutive quarter of profit declines and fourth straight quarter of falling revenue in July.

United States Steel stated that Cleveland Cliffs “refused to engage in the necessary and customary process,” driving it to accept the “economic terms of the proposal in advance” without being allowed to conduct a proper due diligence check.

Given the impending new levies on imports of tin cans commonly used to pack long shelf-life food, might this move solely benefit Cleveland-Cliffs at the expense of the American consumer who might want to store them as emergency food supplies?

Let us consider a report released in mid-March by the USITC following an investigation on levies against steel and aluminum by the Trump administration; it stated that U.S. companies and consumers “bore nearly the full cost of these tariffs because import prices increased at the same rate as the tariffs.”

The report went on to state that increases in U.S. product prices was almost equivalent to the cost of the tariffs, in that “prices increased by about 1 percent for each 1 percent increase in the tariffs.”

In fact, according to a report released in 2021 by Moody’s Investors Service, U.S. importers were paying around 18.5 percent more for a Chinese product given a 20 percent tariff rate, while Chinese exporters were absorbing 1.5 percent less for the same product. Essentially, the credit rating agency reported that U.S. consumers were bearing over 90 percent of the costs of the tariffs applied to Chinese goods.

For comparison purposes, according to data from the Peterson Institute for International Economics (PIIE), U.S. tariffs on Chinese goods were, on average, 3.1 percent, while China’s tariffs on U.S. goods were at 8 percent before the elevated tariffs imposed in early 2018.

Considering the above, could the new tariffs on can-making steel for emergency food have a similar result?

After learning that the Biden administration was considering the petition from the United Steelworkers and conglomerate Cleveland-Cliffs, the president and CEO of a family business—Maryland-based Independent Can—spoke out.

In an article published by Fox Business, Rick Huether expressed that new tariffs on imported tinplate steel would not only harm his own business but “threatens tens of thousands of U.S. manufacturing jobs.”

Huether reasoned that his business places effort to purchase U.S.-made tinplate but that domestic steel manufacturers “only have the capacity to produce about half of the tinplate that U.S. can makers need.” For this reason, Independent Can rely on imports from Europe and Canada to produce “affordable, high-quality decorative tins” for U.S. consumers.

The argument proposed is that a large business such as Cleveland-Cliffs is seeking “federal protection” from non-U.S. competition at the expense of smaller manufacturing companies like Independent Can.

Huether goes on to state that:

“Facing higher prices for our own inputs, we’ll have to raise the price of our products. Demand for cheaper cans and decorative tins made overseas will increase, as my customers turn to companies from China, Mexico and other countries—all because of these tariffs.”

According to the latest update by Tax Foundation, a leading U.S. think tank and nonprofit tax policy research organization, it is estimated that the accumulation of tariffs imposed by the Trump and Biden administrations will “reduce long-run [Gross Domestic Product] GDP by 0.21 percent, wages by 0.14 percent, and employment by 166,000 full-time equivalent jobs.”

Another U.S. think tank, the Trade Partnership Worldwide LLC, specializing in international trade and economic research, published a study in April and estimated that over 600 manufacturing jobs would be threatened for every steel worker who benefits from the proposed tariffs.

Interestingly, the 2018 policy that imposed tariffs on imported steel was supposed to protect U.S. jobs in steel production and bolster domestic production. Yet, this move resulted in higher costs for industries that use steel and typically employ substantially more workers—e.g., energy, construction, automotive & transportation, infrastructure, and packaging & machinery. Consequently, according to the PIIE, every job protected by the tariffs costs U.S. consumers around $650,000.

Now, consider a scenario where more products are not only manufactured in the United States, but where raw materials are also produced domestically—how would this shift impact U.S. employment, wages and product prices?

Interestingly enough, the Biden administration announced in 2022 a series of “major investments in domestic production of key critical minerals and materials” to supposedly create “good-paying, union jobs in sustainable production” as the “world transitions to a clean energy economy.”

Details in the announcement included “public-private partnerships” and private investments to bolster the critical mineral supply chain and reduce dependency on China, which reportedly controls most of the market in processing and refining cobalt and lithium for technologies including batteries, electric vehicles, wind turbines and solar panels.

Consider the following:

  • $3 billion in funding under the Bipartisan Infrastructure Law in refining battery materials;

  • $140 million demonstration project to recover rare earth elements and critical minerals from coal ash and other mine waste, reducing the need for new mining;

  • Berkshire Hathaway Energy Renewables will test the commercial viability of their sustainable lithium extraction process from geothermal brine as part of a multibillion-dollar investment.

So, in justifying domestic employment opportunities in raw materials production, to reduce reliance on foreign sources and adversarial nations, the Biden administration proposed a series of significant investments with industry stakeholders—and this also includes updating “mining laws and regulations” through an interagency working group that will direct “legislative and regulatory reform of mine permitting and oversight.”

Simply put, according to data from the United Nations from 2019, the U.S. accounted for 17 percent of global manufacturing output versus China’s leading share of 29 percent.

Americans must keep an eye on the manufacturing industry, which, although representing only 11 percent of U.S. GDP and 8 percent of direct employment, accounts for 20 percent of U.S. capital investment, 35 percent of productivity growth—and 60 percent of exports according to analysis by the McKinsey Global Institute published last year.

And on this note, there are questions to consider:

  1. How are Americans across a wide range of manufacturing industries being impacted at a state and local level, and across white-collar, blue-collar and “new-collar” roles?

  2. Are small manufacturing businesses going to be pushed (a.k.a. coerced) through federal policies to join large monopolies tied to public-private partnerships?

Folks, demand answers.

Folks, demand change where necessary.

Content syndicated from Dear Rest of America with permission

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Dear Rest Of America

Dear Rest Of America is a newsletter written by Cameron Keegan, who independently researches and writes about American politics, faith and culture affecting young people through a conservative disposition. To learn more, visit Dear Rest Of America and for questions, send an email to ckeeganan@substack.com

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