It seems as if I’ve been writing recently only about the effects of public policy on the foodservice and foodservice equipment and supplies business. Last month it was about the impacts of changes in the new tax legislation on the restaurant business. This month I write about the impact of new tariffs the Trump Administration plans to impose on imported steel and aluminum.
(By the way, I was mistaken in my discussion of restaurateurs’ supposed ability to immediately depreciate the costs of renovation and purchase of new or used equipment. More on that coming up.)
First, let me discuss the new metals tariffs. In February, President Trump surprised a lot of people, including leaders of his own Republican Party, by tweeting his intention to slap a 25% tariff on imported steels and a 10% tariff on imported aluminum. Originally, the tariffs appeared to apply to imports from all countries, including Canada, Mexico, and our allies in Europe. Canada is the largest importer of the two metals to the U.S.
But as the policy began to be fleshed out, changes were made. Canada and Mexico, which also are in the midst of renegotiating the NAFTA with the U.S., were temporarily exempted. The European Union and other allies also are lobbying hard for exemptions.
Whatever the tariffs finally become, it is safe to say it won’t be good for the foodservice E&S business. E&S products contain a lot of both metals.
NAFEM reacted quickly to the tariffs announcement. It sent an “Action Needed” alert to association members the day after Trump first tweeted about the tariffs. “NAFEM maintains these plans will severely impact foodservice equipment and supplies manufacturers, putting our member companies at risk.
“Since the President intends to act quickly, it is imperative that you contact the White House and your U.S. Senators and Representatives immediately to indicate your opposition to the proposed tariffs.” And the association provided a “toolkit and talking points” guide for its members. You can see the guide at www.nafem.org/advocacyissue/taxes-tariffs-trade-issue-1/.
But no matter what the eventual impact of the tariffs, prices for key metals used in equipment and supplies have been rising, sometimes dramatically, for two years. According to Metal Miner, prices for carbon steels doubled from January 2016 to March ’18. Aluminum prices are up nearly 35% since January ’16. Copper is up just shy of 40% during the period. And stainless prices have shot up more than 44% January ’16 to March ’18. And Metal Miner says the outlook for all four categories is for still higher prices.
The bottom line is foodservice E&S manufacturers will almost certainly become more aggressive in raising their own prices. Be forewarned.
Now back to the tax depreciation period for capital improvements and purchases. A New York Times article March 4 stated a drafting error in the legislation—far from allowing the immediate write-off of such investments— failed to allow a 15-year depreciation period sought by the National Restaurant Association and others.
The article cites NRA Exec. V.P. of Public Affairs Cicely Simpson as saying, “It is our understanding it was an honest mistake. The bipartisan intent behind the law was a 15-year depreciation period and we are confident Congress will have this resolved quickly.” But a fix will not be that easy, as “legislation correcting any portion of the tax bill will require Democratic votes to get through the Senate.”
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Consultants and operators weigh in.