‘Belligerent trade policy’ costs are adding up for manufacturers

Tariffs increased $54 million for Wisconsin imports this summer

A town hall held at Husco International in Waukesha by Tariffs Hurt the Heartland in 2018.

Last updated on July 2nd, 2019 at 09:08 pm

Increased tariffs cost Wisconsin companies an estimated $54 million this summer and a panel of manufacturers said Thursday the Trump administration’s actions are hurting their short-term profitability and making it difficult for them to compete over the long-term.

“We’re just setting ourselves up for constrained economic growth,” said Mary Isbister, president of Mequon-based GenMet Corp.

Isbister joined Husco International president and chief executive officer Austin Ramirez and Good City Brewing co-founder Dan Katt for a panel discussion at Husco presented by Farmers for Free Trade and Americans for Free Trade. They were also joined by representatives from the agriculture and restaurant industries along with the U.S. Chamber of Commerce.

The event was the seventh town hall held around the country by the two organizations under the name Tariffs Hurt the Heartland.

According to data released by Tariffs Hurt the Heartland, Wisconsin companies paid roughly $3.8 million in tariffs on $408.5 million in goods imported from June to August of 2017. The nearly 17 percent increase in imports during the same period this year would have resulted in an additional $642,000 in tariffs, but with the new tariffs imposed this year Wisconsin companies paid more than $58 million in tariffs.

Those increased costs include around $30 million in July and August for the first two rounds of tariffs on Chinese goods, about $18 million for increased tariffs on foreign steel and around $5 million on foreign aluminum.

Isbister said she first saw prices on steel beginning to increase in March, before tariffs were actually implemented. Vendors with whom GenMet had monthly or even six-month pricing agreements shifted to weekly and now daily pricing changes.

“Uncertainty is about the worst thing you can have,” she said.

Ramirez said not only do the tariffs hurt his business to the tune of about $1 million a month, the decrease in profitability hurts Husco’s ability to invest in community groups.

He added that Husco is being hit not only on its importing of components but also when suppliers send goods to the company’s operations in China, noting that the company produces products in the end market country.

While companies are taking a hit to their profitability in the short-term, Ramirez said if the tariffs stay in place Husco will be less competitive internationally.

He’s not the only one to point out that the tariffs may be missing their mark. Frank Carroll, chief executive office of Hartford-based Broan-NuTone, pointed out at a recent BizTimes Media event that his company is being hit by higher steel and aluminum prices caused by the tariffs, even when he sources it from the U.S. There are also components he can only get in China and now has to pay tariffs on. His competitors, meanwhile, produce outside the U.S. and don’t pay either tariff and many of their goods come into the U.S. without tariffs.

“There’s certainly been behavior by China and other countries that we need to address,” Ramirez said. “Tariffs are not the right policy tool to use.”

The specific issue at the center of the back and forth with China is the Trump administration’s position that U.S. companies have been forced to transfer their intellectual property to the Chinese. The broader discussion includes the growing trade imbalance between the two countries since the early 2000s.

An analysis released this week by the Economic Policy Institute suggests the growth in the U.S. trade deficit with China between 2001 and 2017 was responsible for the loss of 3.4 million U.S. jobs, including 1.3 million since 2008. The U.S. had a $375 billion trade deficit with China in 2017, according to the U.S. Census Bureau.

In Wisconsin, the trade deficit led to the displacement of 78,700 jobs since 2001, the ninth largest share of any state at 2.67 percent.

Isbister acknowledged that trade policy is complex, but she said the U.S. actions were “bordering on belligerent trade policy” and questioned if the economic benefits of tax and regulatory reform would be undone by the trade disputes.

“We’ve got all these other policy tools that we could have used,” Ramirez said later during a roundtable discussion with U.S. Sen. Ron Johnson, R-Oshkosh.

“I’m scratching my head too,” Johnson said. He later said that he has had productive conversations with the administration and U.S. Trade Representative Robert Lighthizer.

“They have their worldview, they have their goals,” Johnson said

He said the administration does have a game plan and negotiating strategy but isn’t sharing it to maintain its position.

“I’m just crossing my fingers they realize the clock is ticking,” Johnson said. “I don’t want to undermine this because I want this concluded as quickly as possible, but even in saying that I’m to a certain extent undermining the administration’s position.”

The renegotiated trade agreements with Canada and Mexico could provide some relief and the administration has started talks with the European Union and Japan, but the possibility of additional rounds of tariffs with China could mean more challenges for manufacturers and ultimately Wisconsin residents.

Susan Quam, Wisconsin Restaurant Association executive vice president, said right now her organization’s members are seeing the increased costs in their equipment. She pointed out future Chinese tariffs would increase costs for seafood, most of which is processed in China.

“Wisconsin consumers are pretty price sensitive,” she said. “They don’t like to see their Friday night fish fry go up a dollar.”

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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