Latest Tariff Changes Directly Affect HVACR Products

From the start of his second term through the present, President Trump has brought forth a dizzying array of changes to the country’s tariff schedule. Through July, those changes have resulted in an effective tariff rate of 14 percent for all HVACR-related product categories, and 10 percent for all U.S. imports.

The Administration has levied tariffs this year primarily under authority granted through Section 232 of the Trade Expansion Act of 1962, and the International Emergency Economic Powers Act (IEEPA). Tariffs levied under IEEPA powers primarily include those designed as a response to trade deficits (i.e. “reciprocal” tariffs) and the flow of fentanyl into the U.S., while tariffs levied under powers granted by Section 232 include those more narrowly targeting specific product categories.

Since late July, the Administration has invoked both IEEPA and Section 232 multiple times to make additional changes to existing tariff rates, and these actions will have a direct impact on HVACR price levels. The most relevant changes for HVACR manufacturers and distributors include the following:

• The expansion of 50 percent tariffs on steel, aluminum, steel derivatives, aluminum derivatives, and copper (Section 232).

• Changes to many of the reciprocal tariff rates first established on April 2^nd, including raising the rate on non-USMCA covered products from 25 to 35 percent (IEEPA).

• The suspension of duty-free, de minimis treatment for all covered products, regardless of country of origin, valued at $800 or less.

Of the changes made, perhaps the most impactful is the expansion of tariffs on steel and aluminum derivative products, which includes many HVACR products that fall within the following categories:

• Split system AC/HP

• AC/HP parts

• Compressors and compressor parts

• Refrigeration and refrigeration parts

• Industrial cooling/freezing machines

• Refrigerants

• Boilers

• Electric space heating devices

• Electric storage water heaters

• Electric motors

• Fan/ventilation components

For any HVACR product now covered by the derivative steel or aluminum product categories, the duty imposed will apply to the declared value of the product’s steel or aluminum content (in kilograms). Steel or aluminum derivative products also remain subject to any applicable IEEPA tariff, meaning that any non-aluminum or steel component of the product will also be subject to country-specific tariff rates.

The top 5 largest foreign sources of HVACR products are Mexico, China, Canada, Germany, and Japan, which in 2024 were collectively responsible for the export of 65 percent of all U.S. HVACR imports. In 2024, the effective tariff rate imposed on imports from these countries was 4 percent - a figure poised to shift dramatically upward in the months ahead. Based on 2024 figures, and an assumption that 50 percent of each imported steel or aluminum derivative product is subject to the Section 232 tariffs, our initial estimates show that the effective tariff rate on all imported HVACR products has climbed just over 21 points – from 4 to 26 percent for the aforementioned 5 countries. Viewed on a country-by-country basis:

To date, the changes in tariff policies made in 2025 have had a limited impact on industry price levels – up 4 percent from a year ago – as many importers and manufacturers have elected to absorb the higher tariff costs. However, should the current policies remain on the books, suppliers will have no choice but to pass along these costs, particularly in a year where slower end market demand is already stressing business profitability.