Trump Makes Changes to Metals Tariffs, Likely Reduces Impact on Some HVACR Products

Yesterday, President Trump signed a proclamation changing how Section 232 tariffs on steel, copper, and aluminum products are calculated. Section 232 tariffs have been among the most impactful on HVACR and water-heating products. Here is the summary of the changes released by the White House:

• Articles made entirely or almost entirely of aluminum, steel, or copper will pay a flat 50% on their full value — for example, steel coils and aluminum sheet.

• Derivative articles substantially made of steel, aluminum, or copper will pay a flat 25% on their full value.

• Certain metal-intensive industrial equipment and electrical grid equipment will pay 15% through 2027, to accelerate the massive industrial base buildout currently underway across the United States.

• Products made abroad but entirely with American steel, aluminum, and copper will be subject to lower tariffs of 10%.

• Products made of 15% or less steel, aluminum, or copper will no longer be subject to Section 232 metals tariffs.

HVACR products are considered derivative products, and if the total product content exceeds 15% aluminum, 15% copper, or 15% steel (it appears to be each, not cumulative), the product faces a 25% tariff on the value of the entire product. If the product contains no more than 15% aluminum, copper, or steel, it is exempt from the tariff.

The bottom line is that the metal's value is important in determining whether the product’s payable tariff will increase or decrease under the new rules. If we assume that most HVACR products have high metal content as a percentage of the import value, the payable tariff is likely to decrease. For example, if 80% of the import value is derived from the metal content, under the previous Section 232 tariff system, the payable tariff would be 40% of the unit’s total cost (80% value x 50% duty = 40% payable). Under the new tariff system, the payable tariff would be 25% of the value, a significant reduction from the theoretical 40% payable tariff. For products in which the value of the metal accounts for less than half of the product's value, the new system would result in an increase in the payable tariff. For example, if 40% of the value is metal, the previous payable amount was 20% of the total value, but under the new system, it is 25%, an increase.