Costs for many Minnesota factories just jumped as Trump places new tariffs on steel, aluminum

Hibbing Fabricators on the Iron Range has had a fantastic four years.

Sales grew 60% as orders from Cirrus and other aircraft makers jumped for the high-precision aluminum, steel and copper parts made by the company’s 37 workers.

Business has been so robust, co-owner Rally Hess just added five workers.

But Hess is worried. His company might get caught in the middle of any fallout that could come from 25% tariffs President Donald Trump ordered on imported aluminum and steel.

Hibbing Fabricators sources its sheet metals domestically. But some of its customers, for example, buy its customized products and ship them to Mexican factories, which in turn do some assembly work and ship the resulting bigger part back to the U.S. to finalize products.

With those steps, he’s worried that demand for his products will go down.

“Ultimately, you and I as consumers are going to pay for any of this stuff,” Hess said.

Many Minnesota manufacturers have the same concerns, plus increased costs because they buy imported metals, said Bob Kill, CEO of the manufacturing assistance group Enterprise Minnesota.

While large steel producers in Pennsylvania and taconite producers in Minnesota could see more business as Trump’s steel and aluminum tariffs take hold, those companies that need to buy a lot of metals, especially aluminum, are suddenly worrying about their bottom lines.

U.S. companies import about 80% of aluminum used, according to Morgan Stanley. Canada sourced about 56% of it in 2023, with more coming from places like United Arab Emirates and Mexico.

Less steel is imported, but of that, most also comes from Canada, leaving Minnesota’s factory heads scratching their heads.

“They are frustrated and concerned. Tariffs are going to have an effect [and that] puzzles a lot of people,” Kill said. “Supply chains are very complex.”

In many cases, there are steel or aluminum supplies that are simply not manufactured in the United States, he said.

“Quite frankly, all of our manufacturers would love to have their suppliers close to home,” Kill said. “If you’ve got 200 components going into a product, you might have two or three that you’d really have a hard time sourcing domestically, like [ball bearings]. In the past, when the tariffs were talked about, there were exceptions for things like that.”

This round, at least so far, does not have those exceptions.

And factories, he said, were not ready for the latest tariffs and did not factor the higher costs into prices. So they risk facing a financial hit.

Pete Dankwerth, chief financial officer of the Pohlad family’s robotics, rocket and airplane parts maker Par Systems in Shoreview, said his company is taking a “wait and see” approach before deciding how it will respond to the new tariffs.

“When we think about the tariff announcements, we think about four areas: certainly customer orders, pricing negotiations, project costs, and what I’ll generically call supply-chain fulfillment,” Dankwerth said.

For example, there is worry other manufacturers might react to the tariff threats by racing to scoop up supplies before the taxes kick in, he said. That could create shortages.

“So we’re looking at all those areas and obviously, we’re thinking a lot about how these things may influence pricing, particularly how we price our projects to customers over time,” he said.

Par Systems is in the midst of building a $20 million laboratory and production facility on the site of Deluxe Corp.‘s former headquarters campus in Shoreview.

Dankwerth said the tariffs will not affect Par System’s expansion plans. Par Systems employees have been cramped in its current adjacent space. The expansion will alleviate that and help the firm expand its production capacity.