The document discusses how President Trump's tariffs on steel and aluminum may affect the trucking industry. It explains that the increased costs of steel will likely be passed down to customers. While companies may initially absorb these extra costs, they will eventually be forced to raise prices. This could lead steel companies to try and cut transportation costs, though options are limited due to the current trucking capacity crunch. Alternatively, companies may consolidate operations closer to core customers or lose business to competitors able to offer lower prices. The tariffs could also result in industry consolidation through mergers and acquisitions or smaller steel suppliers going out of business if unable to compete. Finally, the cost of new trucks and trailers will rise as well. Only time

1. Volume 7,June 7, 2018
Tariff’ic or Not?
Unless you have been livingunder a rock for the lastfew months, you have heard about the tariff’s
President Trump is imposingon foreign steel and aluminum (25% on steel and 10% on aluminumrespectively).The
discoursethis month is not to talk about my opinion and/or if I think it’s right or wrong; there has been plenty of
debate already aboutthat. What I want to discussand get everyone thinkingabout is,will this affectthe trucking
industry and,if so, in what way(s)?
Well,for starters,an increasein the costof steel will inevitably getpassed down to the customer, it
doesn’t take a rocket scientistto figurethat out. Just likeyou are seeing risingcosts of other commodities due to
ELD mandate, HOS regs and higher fuel prices.Initially,companies digestthese costs in order to maintain the
business and service,but they will notdo that for long. Jim Foote, Presidentand CEO of CSX confirmed in an
interview with CNBC back in March.To quote, “We would absorb the initial costs,butover time that cost, like
everything, gets passed on.”
So what does that mean for the carrier? Well,we have yet to see, but can use history as a lesson to
speculatewhat “could”happen. In the pastwhen the costof a product has increased,companies would try to
mitigate the extra costby drivingdown the cost of transportation.Unfortunately, for steel companies,this is no
market for cutting costs in transportation as everyoneis feeling the “capacity crunch”in trucking.Alternatively, we
have seen companies consolidatetheir operations closer to their core customers, thus maintainingfair prices while
being ableto servicethem effectively by keeping the transportation miles shorter.Customers outside of that
servicearea will justhaveto pay more to get the products they need. This is a regressivemeasurethat is not the
best for the steel industry.It may work with more specialized goods,but steel is a commodity item and customers
are not going to pay more for the same thing they can get from someone elseat a better price;these customers
would be lostto competitors. Lastly,depending on how long the tariffs last,you may see consolidation within steel
production,with more larger players in the industry gobblingup the smaller guys becausethey can’tcompete
and/or small steel suppliers simply goingoutof business.
Finally,thecost of vehicles,includingthe costof tractors and trailers, will go up. So, regardless if you see
more domestic loads of steel and less container/dray loadsfromimports,if you are a truckingcompany wanting to
add on new equipment…you are going to pay for it. Of course, at this pointwe can only theorize as to what may
happen. Will itbe good for the truckingindustry as a whole and add more freight for flatbed and van carriers? You
would think so. Will itincreasedomestic useof rail moreso than before to help off-set the higher priceof
steel/aluminum? That would also make sense. Have we ever seen a tariff likethis imposed in a truckingmarket like
we see currently? That is a definite NO. Only time will tell if this will help or squeeze an already tight trucking
market where alternativesolutions and other options will haveto be considered in order to meet consumer
demands.
Joey Holder, DML, CTL
Director-SatelliteOperations & Corporate Development
Eagle Transportation,LLC.
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