In at least one sector in Alaska, the impacts of President Donald Trump’s steel and aluminum tariffs are real.
Homer’s Bay Weld Boats makes custom aluminum watercraft, from 60-foot tenders to 22-foot seine skiffs.
General manager Eric Engebretsen has been keeping an eye on plans for a 10-percent tariff on imported aluminum.
He’s not alone.
“The supply chain heard this was potentially going to happen back in early January and the whole marine aluminum supply chain started to adjust itself and prepare itself for this,” Engebretsen said.
Engebretsen’s company buys sheet aluminum from a local supplier. He said his understanding is that it’s manufactured in the United States.
But that hasn’t made any difference.
Bay Weld and other aluminum users started buying up supplies in advance of the announcement.
“We’ve seen over 35 percent and in some cases 50 to 60 percent increase in our pricing structure of purchasing aluminum,” Engebretsen said.
The second-generation business owner hopes the hikes will level out soon, but Engebretsen’s not counting on it. He said that will increase prices on the 12 to 18 custom boats his up to 32 employees make in a year.
Alaska has a number of other aluminum boatbuilders.
Other businesses make or repair steel ships, including Vigor Marine, which runs the Ketchikan Shipyard, where state ferries have much of their work done, including rusty steel replacement.
Trump’s imported steel tariff is 25 percent.
The state Department of Transportation includes the ferry system.
“DOT doesn’t expect the tariffs will impact our state transportation,” spokeswoman Aurah Landeau said. “DOT doesn’t purchase foreign steel because we operate under the Buy America program.”
Beyond shipbuilding, Alaska businesses fabricate fuel tanks and other goods out of the embargoed metals. But not a lot.
“We tend to have a pretty small manufacturing industry in Alaska,” state economist Karinne Wiebold said.
Wiebold said the tariffs could still drive up prices which will affect stores, warehouses and other sellers. She said their response could shake up sectors of our economy.
“If the cost of the final product goes up, the demand may fall as consumers either cut back on that product or substitute for something that (has) a comparably lower cost,” Wiebold said.
That’s also the case for steel and aluminum used in bridges, buildings, ports, pipelines and other public projects. And overall, many parts of Alaska’s construction industry have slowed down.
“Road construction, airport construction, that’s still very healthy and it’s been under the Buy America Act for years,” John MacKinnon, executive director of the Alaska Chapter of Associated General Contractors, said.
Steel’s role in construction is pretty obvious. But MacKinnon said many people aren’t aware of how much aluminum is used.
“On the building side, you’ve got a lot of aluminum because all the windows, storefronts and that sort of thing are aluminum,” MacKinnon said. “The structure is usually steel or concrete. And the highway projects, road projects, most of your signage and there’s other components in there, are aluminum.”
MacKinnon said prices change for a variety of reasons. Tariffs, such as Trump’s, are only one type of variable in his industry.
“Will it make much difference? Not from the practices that we’ve been going on for the last few years,” MacKinnon said.
Back at Homer’s Bay Weld Boats, Engebretsen said some in the business are scratching their heads.
“There was a political layer to this that really wasn’t driven by the industry itself,” he said. “The industry didn’t ask for the aluminum pricing to be adjusted. It was kind of something that was forced on us and now here we are,” Engebretsen said.
Engebretsen is already considered how much he’ll have to raise his prices.
It could be 5 to 10 percent, which is not out of line with other adjustments for inflation, Engebretsen said.
“But it’s also a fairly high-dollar product. I suspect it will have an impact,” Engebretsen said. “But we just don’t know yet.”
The president has granted exemptions for metal imports from Canada and Mexico, which could lessen some of the price hikes.
The exemptions are only temporary, and they’re dependent on negotiations to update the North American Free Trade Agreement.