Many HVACR professionals, managers, and technicians have been watching the news and wondering how the tariffs are going to affect the HVACR industry. Tariffs directly affect the basic materials that manufacturers who import these materials would use in constructing their equipment, including air handlers, boilers, air conditioners, furnaces, and more. To learn more about how these tariffs could affect all of us in the HVACR industry, read the interview below, which took place between achrnews.com and Jim Walters, the vice president of International Affairs for Air-Conditioning, Heating, and Refrigeration Institute (AHRI).
Tariffs and how they are going to affect the HVAC industry, as well as the national economy, have been talked about in many HVAC circles lately. The NEWS wanted to get an expert opinion on the issue and recently talked with Jim Walters, who is the vice president of International Affairs for Air-Conditioning, Heating and Refrigeration Institute (AHRI).
The NEWS: There’s been a lot of tariff talk in the news lately. Can you let our contractor audience know what the situation is?
Walters: Well, I think the facts are that there are two types of tariffs. The first tariffs are the Section 232 tariffs that apply to steel and aluminum. They directly affect the basic materials that manufacturers who import those materials —our members — would use in constructing their equipment. And when I say equipment, I’m talking about boilers, air conditioners, furnaces, water heaters — the full gamut of the membership that AHRI represents. The second set of tariffs that gets most of the news these days are the Section 301 tariffs with China. There have been three rounds of those tariffs, and we are currently anticipating a round four. In terms of the impact on our industry, what do all these rounds mean? Well, essentially, we’re looking at what would be easily $300 billion worth of goods if we went through with round four of Section 301. That’s a very significant number and shows the expense of the tariffs.
The NEWS: Why do you think the administration made this decision on the tariffs?
Walters: One reason was that the president has expressed a concern with America’s trade picture since running for president. I think it’s fair to say that from his actions, we know that he does not like multilateral treaties. He believes that the balance of trade figures that we’re looking at — while they’re not the only issue — they’re an indicator of an imbalance between American manufacturing and global manufacturing that has an impact on the creation, or lack of creation, of American jobs.
The NEWS: How do the tariffs affect the HVAC market? If materials are getting more expensive, it’s not a big leap to say that the products are going to cost more. Is that what you guys are seeing?
Walters: In general, the answer is yes. But keep in mind that while we listen to our members and monitor what’s happening in the marketplace, we don’t keep a specific rendering or document on particular increases. But our members have told us quite clearly that there has been an increase in their costs. And that increase in costs comes from two areas — one of which is not as obvious to recognize. One is, if they are importing a product that’s covered by a tariff, they have to figure out what to do with the increased price of that product — from 15 to 25 percent. Do they absorb it? Do they not hire people because they absorb it? Do they pass it on to the customer? A lot of downstream economic consequences come from it. And I think that is very important. But there’s a second cost of the tariffs to the members and that is complying with the tariffs and asking for exclusions. The 301 tariffs allow the importer to ask for a particular product to be excluded from the tariff as originally published. This is a tedious and time-consuming issue because every product under the tariff is published in the Tariff Schedule of the United States. It has a particular definition. It occupies literally a particular line in a huge Tariff Schedule for the U.S. Currently, we’re estimating there are 1,877 lines of tariffs. So once they decide they want to apply for an exclusion, then the manufacturer has to call for that exclusion on a particular form. They need to provide a great deal of information. AHRI has heard from its members that this form can take from two hours to 14 hours, depending on the number of lines to fill out. What we’re talking about here is a disruption of regular business for members of getting products to the public via the contractors. It has a tremendous impact across the board.
The NEWS: Now, AHRI is the advocate for the HVAC manufacturers. What are you guys doing to make sure the people in power know the views of the manufacturers? Are you partnering with the ACCA’s and HARDI’s of the world so the industry can speak with one voice?
Walters: We believe it’s important for the industry to do that. The short answer is that we’re engaging not only in conversations but in coalitions with other groups: the ones you mentioned as well as the National Association for Manufacturers. And we have both visited with the Democratic and Republican staff of the House Ways and Means Committee, which has a role in tariffs. Also, through our research, we have learned the exclusion rate for our industry. That is how many exclusions have been granted or not. Our industry is almost 40 percent lower than the average for all other industries. This is a relatively newly discovered fact by us, and we’re taking steps to find out what is the issue here. At the moment, I just don’t know any more than what I’ve told you.