Tariffs & Quotas Resulting in Disastrous Steel Can Crisis
The Section 232 tariffs on tinplate steel, which is used to make cans for canned food, are exacerbating supply chain issues in the canned food industry and contributing to food inflation. The steel tariffs were implemented to help the American steel industry invest in new or updated facilities. The American canned food industry has historically relied on imports for 40% of tinplate demand, so additional investment would have been welcome. However, the steel industry did not invest in tinplate production – in fact, domestic tinplate production has contracted from 11 production lines to 8 since 2018, with an additional major tinplate plant closure slated for 2023.
Despite the production cuts, the domestic steel industry has been raising tinplate prices and pocketing the profits. The CEO of Cleveland Cliffs bragged to investors in a recent earnings call, “We’re doubling the price of our tinplate because the costs are not increased…So, we are going to have a meaningful, bigger contribution from tinplate” to profits.
Amid dwindling production and rising prices, the 25% Section 232 tariff serves only to drive food inflation, for which the burden falls disproportionately on low- and fixed-income Americans and food banks. 41% of the cost for a 15 oz. can of American-grown corn is the can itself – much more than labor (14%) or even the corn itself (22%). As a result, year-on-year inflation for canned fruits and vegetables in March 2022 was 11.2%. The tinplate tariffs and resulting inflation are making foreign canned food imports, which for the most part face no such tariffs, price competitive with domestically-grown and -packed canned food. For instance, imports of canned fruits and vegetables from China soared 811% in 2020 from 2019.
Hard-cap quarterly quotas on steel imports from South Korea and Brazil place strict limits on key potential tinplate suppliers. A 90% anti-dumping duty on Japanese tinplate also further restricts tinplate availability from allies. The recently-announced tariff-rate quota deals with the EU and UK unfortunately do not meaningfully increase tariff-free supply, especially with the war in Ukraine increasing the need for more canned goods in Europe.
The steel tariffs are under the full control of the Commerce Department, which could relieve pressure on this critical domestic industry by taking one of two actions: 1) Announce a categorical exclusion for tinplate steel, removing the tariffs on these products outright, or 2) renegotiate the hard-cap quotas on tinplate steel from South Korea and Brazil.