Impact of Steel Tariffs and Import Valuation Ambiguities
The company is actively working with the Department of Commerce to clarify the valuation of steel imports under Section 232 tariffs, which has caused significant uncertainty.
Management highlighted that some importers report steel values equal to wire rod or scrap, potentially undermining tariff objectives.
The ambiguity in tariff application could lead to retroactive adjustments and possible customs violations, adding operational risk.
Despite the tariff complexities, Insteel continues offshore wire rod imports to support production, passing higher costs to customers.
The increased tariffs on steel are expected to influence raw material costs and import strategies, with potential long-term impacts on supply chain stability.
Frank Bozich highlighted that trade uncertainty, especially after April tariff announcements in the U.S., led to high order cancellations early in Q2, dampening seasonal demand.
Management noted that cancellations decreased significantly during the quarter, but the overall demand remained weaker than expected due to geopolitical and trade risks.
The company believes that resolution of trade uncertainties could unlock demand, with potential demand recovery driven by improved trade policies and geopolitical stability.
Impact of Tariffs and Trade Negotiations on Supply Chain Strategy
Mohawk emphasizes the importance of local production, with about 85% of U.S. sales produced in North America, including Mexico under USMCA.
The company is actively monitoring and adjusting to tariffs, with a new deadline of August 1 for tariff negotiations.
Tariffs initially ranged from 10% to 50%, with ongoing negotiations causing uncertainty.
Mohawk is promoting domestically produced collections and optimizing supply chains to mitigate tariff impacts.
The company is adjusting prices and supply chain strategies in response to evolving tariffs, with no current inclusion of potential tariff impacts in guidance.
Dafinchi