The 50% Tax Nobody in Compressed Air Saw Coming

In June 2025, Engineering Sales and Service, a compressed air distributor based in Charlotte, North Carolina, published an advisory urging its customers to purchase compressors and related equipment immediately, before incoming tariffs took full effect. "Given Trump's history of imposing tariffs on imports," the advisory read, "there is no reason to believe these new tariffs will not be enacted."¹⁴ ESA did not specify the expected rate. At the time, even customs attorneys weren't sure how the layers would stack.

Two months later, on August 12, 2025, the U.S. Department of Commerce published a Federal Register notice expanding Section 232 steel and aluminum tariffs to cover 407 additional product categories.¹ The notice ran to 847 pages. Air compressors appeared in the appendix, between wire rope and electrical conduit. The rate on their steel and aluminum content: 50%.

By autumn, the stacking was clear. UniColorado Heating & Cooling, a Denver-based contractor, published a tariff breakdown for its customers in which it reported that Chinese-made rotary compressors from manufacturers like GMCC and Highly were now subject to duties as high as 145%. Copeland, one of the largest compressor suppliers in the U.S., responded with price increases of 17% to 40% across its product lines.¹⁵ The Air Conditioning Contractors of America issued a statement warning that the tariffs "will have a considerable impact" on small business owners, citing both increased equipment costs and supply chain disruptions.¹⁶

CAGI, the Compressed Air and Gas Institute, the industry's primary trade association for stationary compressed air equipment, said nothing. It has not issued a statement to this day.

Atlas Copco held its Q4 2025 earnings call on January 29. I read the transcript, all 38 pages. "Section 232" does not appear. Neither does "downstream tariff." Ingersoll Rand reports Q4 earnings on February 12, two days from now.

A procurement officer at a contract manufacturer in the Midwest, who asked not to be identified because his company buys from both Atlas Copco and Ingersoll Rand, told Compressed Air Best Practices in late 2025 that he had contacted three separate customs brokers and received three different duty estimates for the same compressor model. The complexity of the tariff stack, he said, made accurate cost modeling nearly impossible.⁷

The arithmetic on a specific unit makes the scale of the problem concrete.

A 37 kW variable-speed oil-injected rotary screw compressor, manufactured in Taizhou, Zhejiang Province. FOB price: $4,200. Freight and insurance to Long Beach: $600. Entered value on the customs declaration: $4,800.

Per unit duties, without the metal content declaration: $5,570. Landed cost of a $4,200 compressor: $10,370.

With the metal content filed separately, Section 232 drops to $900 instead of $2,400. Total duties: $4,070. Landed cost: $8,870. Still almost double the pre-tariff price. The difference between filing correctly and filing incorrectly, on a single compressor: $1,500. On a twenty-unit order, the paperwork gap alone is $30,000.

I want to stay with the math for another minute, because the comparison with European compressors is where the story turns strange.

A comparable 37 kW unit built by Kaeser in Coburg, Germany. Factory gate price around $9,500, higher because German manufacturing costs what it costs. Section 232 on the metal content, approximately $3,500 in steel and aluminum: $1,750. Then the Greenland tariff, 10%, which I'll get to in a moment: $950. No Section 301. No fentanyl duty. No reciprocal tariff. Total duties on the German unit: $2,700. Landed cost: $12,200.

The Chinese unit at $10,370. The German unit at $12,200. A gap that used to be $5,000 has shrunk to $1,800. A distributor in Phoenix told me: "The Chinese compressor used to be half the price. Now it's roughly the same, with worse lead times and no service infrastructure. Why would I keep buying it?"

In some customs filing scenarios, depending on the HTS code and whether exclusions apply, the Chinese compressor actually costs more than the German one. That sentence would have been incomprehensible eighteen months ago.

The Greenland tariff. I keep mentioning it, so.

On January 17, President Trump signed an executive order imposing 10% duties on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom. The dispute is about Greenland. Denmark doesn't want to sell it. The tariff is the pressure.

Whoever drafted the country list was not thinking about compressed air. Look at where compressors are actually manufactured in Europe, though, and the overlap is total. Atlas Copco, headquartered in Stockholm: hit. Kaeser, manufacturing in Coburg: hit. Boge, in Bielefeld, which makes oil-free screw and scroll compressors almost exclusively in Germany: hit. CompAir, manufacturing oil-free and centrifugal units in Redditch, England, now owned by Ingersoll Rand and still producing there: hit.

I asked him whether his company planned to seek an exclusion or file a comment during the public notice period. He said no. I asked why. "Because the word 'national security' is in the executive order," he said. "You don't fight that. Not in this administration. You just pay."

Atlas Copco is not paying. Atlas Copco is buying.

In January 2026 alone the company closed three acquisitions. Air Compressor Works, a distributor in Florida, $16 million in revenue, 35 employees. Centro do Ar Comprimido do Recife, a distributor in Brazil. Zind Verfahrenstechnik, a filter element distributor in Mainz, Germany, €6.8 million in revenue, 11 employees. Zind has no manufacturing. No patents. No proprietary technology. It resells filter elements. Atlas Copco, a company with $17 billion in annual revenue, bought it anyway.

Pending: ABC Compressors in Spain, a reciprocating compressor manufacturer, 319 employees, roughly €84 million in revenue.

The pattern is not about technology. It is about physical proximity to customers. Atlas Copco is assembling a distribution network that does not require shipping finished compressors from Antwerp through a tariff wall. It is buying the last mile.

Barclays upgraded Atlas Copco to "overweight" on February 6, raising its price target 23% to SEK 178.¹¹ The analyst note cited an expected 30% increase in semiconductor fab construction in 2026. Fabs need enormous volumes of clean compressed air. Fabs are being built in Arizona and Texas.

Kaeser is responding differently. A $20 million new facility in Boisbriand, Quebec. An 80,000 square foot headquarters expansion in Fredericksburg, Virginia.⁵ Concrete-and-steel bets that the tariff architecture is permanent, or at least durable enough to justify construction. If the Greenland order disappears in six months, those buildings become surplus capacity in a market that didn't need more capacity. Kaeser hasn't said a word publicly about this calculation. The buildings are the statement.

The silence makes more sense once you look at who's winning.

Ingersoll Rand makes compressors in the United States. Legacy Gardner Denver plants in Quincy, Illinois, and Sedalia, Missouri. Domestic production. No tariff exposure on the core lineup. Every tariff dollar that lands on an import is a dollar of margin IR collects without investing anything. The company's stock trades at 72 times earnings, a valuation that makes no sense for an industrial conglomerate unless you believe the tariff wall is permanent and domestic production is about to become a scarce, protected asset.

Sullair, in Michigan City, Indiana, owned by Hitachi, benefits the same way. American plant, American production, no tariff.

And then the genuinely absurd part. Quincy Compressor, which builds reciprocating and rotary screw units in Quincy, Illinois, is owned by Atlas Copco. The same Atlas Copco getting taxed on its European production collects windfall margin through its American subsidiary. The tariff wall runs through the middle of the company's own org chart.

IR's CEO Vicente Reynal sold approximately $9.75 million in stock on February 3 and 4.¹³ Zacks trimmed its Q2 2026 EPS estimate from $0.83 to $0.82 on February 9.¹² The CFO has fireside chats booked at Barclays on February 18 and Citi on February 19.

None of these companies have any incentive to draw attention to a tariff that hurts their competitors more than it hurts them. That's the first reason for the silence, and the most important one.

The second: the tariff structure is, genuinely, almost impossible for a normal business to understand. Section 232 downstream is administered by Commerce. Section 301 is USTR. The fentanyl duty is one executive order. The Greenland tariff is a different executive order. The DOE efficiency rule, which I'll get to, is yet another agency. There is no single document anywhere in the federal government that tells a plant manager in Indiana the total effective tariff on a 75 kW screw compressor from a specific country.

The third is fear, plain. The European executive I quoted said it clearly. "National security" is in the legal text. Arguing against a national security tariff, in public, in the current political climate, is the kind of thing that gets a CEO quoted in a context no CEO wants to be quoted in. The safe move is to say nothing, absorb the cost, raise prices quietly, and wait.

The consequence: nobody is arguing for rational distinctions within the tariff. Nobody is lobbying for a high-efficiency compressor exemption that would benefit American factories trying to cut energy costs. Nobody is asking for a phase-in period. Nobody is pushing for a de minimis threshold on metal content. The tariff arrived blunt and it will stay blunt, because the people it hurts most are either too confused, too scared, or too commercially advantaged to say anything.

I mentioned Elgi Equipments earlier in passing. The Indian compressor market deserves more space than it usually gets.

Elgi, based in Coimbatore, faces the Section 232 metal content duty when shipping to the United States and nothing else. No Section 301. No fentanyl duty. No reciprocal tariff. No Greenland order. On January 26, 2026, the EU and India signed a free trade agreement that will gradually eliminate tariffs on 96.6% of EU-to-India goods. Elgi can now build European market share at the same time it exploits a tariff advantage in the U.S. that exceeds 80 percentage points over Chinese competitors.

A trade analyst in Mumbai, in a note circulated to institutional investors last week, wrote that the differential "is not a competitive advantage in any normal sense. It is a windfall created by the foreign policy of a country 8,000 miles away, and it could disappear just as suddenly."

Turkish manufacturers are in a similar position. So are some Southeast Asian producers. The tariff wall was built to keep out Chinese compressors and, collaterally, to tax European ones. Everyone else walked through the gap.

On the other end of the supply chain, below the OEMs and the distributors, are the people who actually need compressed air.

Machine shops. Auto body facilities. Food processing plants. Construction contractors. Pharmaceutical clean rooms. PET bottle blowers. CNC operations. Every one of them depends on compressed air the way they depend on electricity. You can't run a pneumatic tool without it. You can't run most automated manufacturing lines without it. Demand is almost perfectly inelastic, which means the tariff transfers almost entirely to the buyer. The distributor raises the price. The buyer pays it. There is no alternative.

Multiple U.S. distributors have reported raising prices 15% to 20% on Chinese-sourced inventory since the tariff expansion took effect, according to industry contacts. Several are in active discussions with domestic manufacturers like Sullair about switching supply lines entirely.

Astute Analytica published a market projection on January 30 estimating the global air compressor market will reach $120.59 billion by 2033, up from $62.79 billion in 2024.⁶ That's a 7.52% compound annual growth rate. The report didn't break out how much of that growth is real demand and how much is tariff-inflated pricing. I emailed the analyst who authored the report and asked. He hasn't responded.

ISM's January 2026 Manufacturing PMI came in at 52.6%, the first expansion reading after 26 months of contraction.⁷ Good news on the surface. In the survey comments, machinery sector respondents reported something less encouraging: customers front-loading orders, trying to lock in prices before the next round of increases. One respondent, quoted in the ISM release: "If tariffs on European products proceed, the impact on our profit margin will be huge."

Front-loaded demand looks like growth in the data. It is not growth. It is borrowing from the next two quarters. When the borrowing stops, there will be a trough, and nobody on the supply side wants to talk about that either.

The DOE efficiency rule is the other jaw of the vice, and the timing is brutal.

Minimum isentropic efficiency standards for oil-flooded rotary air compressors took effect January 10, 2025.⁸ Coverage: 35 to 1,250 cfm, 75 to 200 psi. Basically the entire commercial and industrial market. If a compressor doesn't meet the threshold, it can't be sold in the United States regardless of where it was made.

The cheapest compressors on the global market, the $2,000 to $3,000 fixed-speed single-stage units that Chinese OEMs have been exporting for years, largely can't meet the standard. They are being regulated out of the market at the same time they're being tariffed out. The bottom of the American compressor market is vanishing from two directions.

The floor price of a compliant, legally importable compressor in the United States has gone up by thousands of dollars in twelve months. Not because the machines changed. Because the rules did.

There's another Section 232 investigation pending, this one into "robotics, automation, and industrial machinery." Opened late 2025. No conclusion yet. If Commerce finds that the U.S. is dangerously dependent on foreign-manufactured industrial equipment, which is the finding the political incentives favor, new tariffs could land on the non-metal components of imported compressors. Airends. Electric motors. Control boards. Software. That would push effective rates on European machines past 50% and on Chinese machines into territory where the math is no longer worth doing.

In 2017, the tariff on an imported air compressor was effectively zero. By February 2026, depending on origin and customs filing, it's between 10% and 145%.

The accumulation was not designed as a policy toward the compressed air industry. It's the residue of eight years of trade actions aimed at steel producers, aluminum smelters, Chinese technology companies, fentanyl precursor supply chains, and Danish sovereignty over an Arctic territory. The compressor got caught in the overlap of five different policy objectives, and nobody in any of the relevant agencies appears to have noticed what the cumulative effect looks like from inside a distributor's accounting department.

Hundreds of Chinese OEMs in Zhejiang and Jiangsu and Guangdong built their export businesses on the cheap compressor. Some are exploring assembly operations in Vietnam and Mexico, hoping to reroute around the tariff. CBP has signaled in multiple Federal Register notices that it intends to crack down on transshipment schemes. Some manufacturers will redirect to Nigeria, Indonesia, the Philippines. Some will simply make fewer compressors.

Inside the United States, Ingersoll Rand and Sullair and Quincy Compressor sit behind the tariff wall collecting margin they didn't earn through investment or innovation. Atlas Copco is buying its way closer to the American customer as fast as deal flow allows. Kaeser is pouring foundations in Quebec and Virginia.

And the buyers, the people who actually need compressed air to make things, are paying more and will continue to pay more, because compressed air is not optional and the tariff wall shows no sign of coming down.

Ingersoll Rand's Q4 earnings call is in 48 hours. Analysts expect $0.91 per share on $2.04 billion in revenue. The numbers that matter are gross margin trend, pricing actions taken in Q4, and the size of the order backlog. Whether that backlog reflects genuine demand or customers panic-buying ahead of price increases they can see coming.

ESA's June 2025 advisory told customers to buy before the tariffs hit. Seven months later, the tariffs have hit. The distributors who stocked up early saved their customers money. The ones who didn't are recalculating their entire supply chain. Nobody in the industry's leadership has offered them guidance on how.