Dropping Steel, Aluminum Tariff Exemptions for America’s Allies Only Worsens a Self-Inflicted Wound on Our Economy

May 31st, 2018

The Administration’s decision to drop steel and aluminum tariff exemptions for America’s allies only worsens a self-inflicted wound on our economy and unnecessarily exposes U.S. exporters to foreign retaliation. While addressing global overcapacity of steel and aluminum is a worthy objective, using ‘national security’ arguments under Section 232 of the Trade Expansion Act of 1962 weakens the international trading system and encourages other nations to use ‘national security’ to place barriers against U.S. goods and services from entering their markets.

These tariffs and increased costs have already caused harm to U.S. businesses and workers. The following stories show what has happened to companies of all sizes across the country:




NEW PHILADELPHIA, OHIO: Gradall Industries, a manufacturing facility,shelved a plan to hire at least 40 more workers after the cost of steel increased by one-third. “Encouraged by a booming demand for construction equipment, Mike Haberman was planning in early February to hire at least 30 more workers for the manufacturing facility of his Gradall Industries in Ohio. That plan now is shelved, Haberman said, because the cost of steel used in Gradall’s telescopic excavators and vacuum trucks shot up by one-third following President Donald Trump’s crackdown on steel imports.”

CINCINNATI, OHIO: The Metalworking Group lost 1,000 hours renegotiating contracts because it couldn’t honor old prices in the wake of steel and aluminum tariffs, delaying plans to spend half a million on equipment and hiring new workers. “Mike Schmitt, president at The Metalworking Group in Ohio, said his metal fabrication company has lost around a thousand hours re-pricing and renegotiating contracts because it can’t honor the old prices. The company has delayed plans to spend around $500,000 on equipment this year and bring on new staff to expand. ‘It’s going to be 2019 before we buy anything because we don’t have enough confidence to do it. There’s just too much uncertainty out there right now,’ Schmitt said.”



MCKEESPORT, PENNSYLVANIA: With news that tariffs would increase costs by the equivalent of two weeks’ payroll, CP Industries said their company “could go down relatively fast,” adding 10 percent to the cost of its cylinders, making it “impossible for” the company “to compete with its Chinese competitor.” “The tariff will add about 10 percent to the cost of CP Industries’ cylinders, which can sell for up to $35,000. And foreign rivals are already swooping in to lure away some of the company’s biggest clients. ‘We haven’t lost a big one yet, but the discussion over who is going to pay for the tariffs has started,’ Mr. Larsen told me. What most sticks in the executive’s craw is that he will probably end up losing business to the company’s main rival in China, Enric Gas Equipment Company of Shijiazhuang, which also makes jumbo vessels. Noting that Enric’s goods are imported under a classification not subject to the tariff, a CP Industries news release added, ‘It is impossible for CPI to compete with its Chinese competitor on this basis … It has received the first bill from the 25 percent tariff that President Trump placed on steel from China and a few other countries: $178,703.09 assessed on a steel-pipe shipment scheduled to arrive at the Port of Philadelphia on Thursday. That’s equivalent to about two weeks’ payroll. Over all, tariffs on steel pipe that the company has ordered from China — some already on its way across the Pacific — will add more than half a million dollars to raw-material costs over six months alone. ‘How long can we last?’ mused Michael Larsen, the company’s chief executive. ‘I don’t know. We could go down relatively fast.’”



TROY, MICHIGAN: A manufacturer wrote to the Commerce Department saying that if they are not exempted from tariffs, it “would result in the loss of American jobs at our Michigan facility. “The Requesting Organization produces about 240 individual spring products at our Michigan facility. Steel products used to produce these spring products are subject to the Section 232 tariffs. Our Michigan operation would not be able to absorb the additional costs imposed by these tariffs. If an exclusion from the Section 232 tariffs is not granted, we would need to consider shifting production to facilities outside the United States which would result in the loss of American jobs at our Michigan facility, where we currently employ about 175 people.”



SHEBOYGAN, WISCONSIN: At Vollrath Company, a food equipment manufacturer, “any positive feeling about the tax overhaul” has been “wiped out,” as aluminum tariffs will make the company’s products more expensive. “The Vollrath Company in Wisconsin, which makes cookware and bakeware items, has started importing aluminum from China after local mills couldn’t meet its demand. The company’s chief financial officer, Steve Heun, says the tariffs, including the latest countervailing duties, will make its aluminum products at least 20 percent more expensive than those of its foreign rivals, and are estimated to increase its input costs by as much as $6 million a year. Its working capital requirements have gone up by 10 percent as the company is now forced to hold more inventory, Heun said. Vollrath employs 1,000 people in Wisconsin and had plans to hire 25–50 workers this year. But with the tariffs weighing on its profitability, Heun says the company is looking for ways to trim costs and has halted new hiring. ‘If there was any positive feeling about the tax overhaul, clearly, it’s been wiped out,’ said Heun.”



LODI, CALIFORNIA: For Pacific Coast Producers, a canned goods manufacturer, steel tariffs are “one cost increase that is more than half of what we make.” “This year the company, based in Lodi, Calif., is facing another challenge that promises to make turning a profit that much harder: President Trump’s tariffs on steel imports. ‘That one cost increase is more than half of what we make,’ says Dan Vincent, the company’s president and chief executive. Pacific Coast Producers’ plight underscores some of the unintended consequences of the Trump administration’s decision last month to impose 25 percent tariffs on steel and aluminum imported from other countries. The administration said the tariffs were needed to protect domestic sources of the metals, which are vital for national security.”



COLORADO SPRINGS, COLORADO: Qualtek Manufacturing is unable “to sustain expansion, develop new products, and bring on new employees” with metal tariffs projected to increase raw material costs. “‘There is just no way to sustain expansion, develop new products and bring on new employees — as we thought we were going to do this year,’ said Troy Roberts, chief executive officer at Colorado Springs-based Qualtek Manufacturing. Roberts’ company provides stamped parts to the medical device and aerospace industries. Qualtek was planning to invest up to $1 million in new capital equipment and expand its workforce by 17 percent this year. Even though the company purchases domestically-produced steel and aluminum, Roberts says the metal tariffs are projected to increase Qualtek’s raw material costs by $300,000, putting the investment and workforce expansion plans in jeopardy.”



BAYTOWN, TEXAS: A steel manufacturer said if the company doesn’t receive exemptions from tariffs, “We won’t be hiring more people. We might have to reduce our existing base.” “‘It’s hard to predict what could happen to us and these families if the exemption process doesn’t go in our favor,’ said Joel Johnson, the chief executive of Borusan Mannesmann’s United States operations, which employ 264 people. ‘I don’t have a crystal ball, but for sure we won’t be hiring more people. We might have to reduce our existing base because we won’t have that material coming in.’”

HOUSTON, TEXAS: Trade uncertainty, especially tariffs on steel, have led to a family-owned steel supply company to tell customers, “There’s nothing we can do. We need to increase prices.” “That’s how company vice president Ronnie Smith says it feels to be a 15-employee, family-owned outfit that is dealing with a new 25 percent tariff on the steel it imports from Japan and other locales — steel the company ‘simply can’t secure here’ in the U.S. The distributor is among the many operations in Texas and beyond now asking the Commerce Department for product-specific exclusions to the import levies on steel and aluminum. But that already time-intensive process has proved unwieldy, with the feds getting swamped by thousands of exemption requests. The overall trade scene remains unsettled as President Donald Trump has stoked tension not only with China, but also with U.S. allies in Europe and North America. And as companies like McMahon Steel Supply wait to learn if they will receive relief, many are already feeling the toll. ‘We can’t eat the cost,’ said Smith, who oversees McMahon Steel Supply’s operations and sales. ‘We have to tell our customers, ‘There’s nothing we can do. We need to increase prices.’”