By: Rob Wertheimer
We don’t see the proposed US steel tariffs as dramatic for machinery earnings, with most companies likely to see minimal earnings risk even without offsetting pricing. Steel represents about ten percent of COGS for machinery companies, some of it purchased directly, but with more embedded in components. The 25 percent tariff would affect steel imported into the US and might also drive up US steel prices. Most of our companies’ businesses are global, with the US half or less of revenues. The tariff might therefore mean a 1-2 percent increase in COGS, which would likely be offset by price recapture.