On October 22, 2018, Rick Barrett writes in the Milwaukee Journal Sentinel:
Rob Parmentier has weathered some rough times in the boat building business, but the trade wars with China, Europe, Canada and Mexico have shaken him to the core.
“It’s been catastrophic,” said Parmentier, president and CEO of Marquis-Larson Boat Group, which builds Carver yachts in Pulaski, Wisconsin.
The first “hand grenade,” as Parmentier described it, was a 25 percent tariff the European Union placed this year on boats built in the U.S., along with scores of other products including Harley-Davidson motorcycles.
Then there was a 10 percent tariff slapped on boats shipped to Canada, along with price increases up to 40 percent on boat building materials.
It’s sent a shock wave through U.S. boat manufacturers.
“We’ve had a lot of order cancellations. Canada and Europe have essentially stopped buying boats,” Parmentier said.
About 450 people work at the company, a large employer in a town of 3,600 residents.
If boat orders continue to slide because of the trade wars, Parmentier said, it will trigger layoffs that could last a long time.
“We’ve been absorbing some of the additional costs … hoping the tariffs will go away. But we can only do that for so long,” he said.
More: Dollar Tree, and its customers, feel pain of tariffs on Chinese imports
More: Why Wall Street is downplaying the risks of a rift with Saudi Arabia
More: In the farm belt and manufacturing hubs, tariffs and trade turn into election issues
Across America’s heartland, small and midsize manufacturers are reeling from higher costs and lost business attributed to a breakdown in foreign trade.
While some have benefited, others have been hammered by rising tariffs — a tax on imported or exported goods — on products including boats, electronics, sporting goods, bourbon and baby cribs, to name a few.
The “handshake deals” Trump made with Canada and Mexico may have saved thousands of automaker jobs. Yet smaller companies, Parmentier said, haven’t seen much relief.
“The rest of us little guys are just getting crushed,” he said.
The tariffs that China recently placed on American ginseng and bourbon, for example, have clobbered Great Northern Distilling, in Plover, Wisconsin, which makes ginseng-infused bourbon.
It’s cost the company 25 percent of its sales.
“All of the buyers have cold feet now. They’ve said until this gets resolved, they’re not placing an order,” said Brian Cummins, co-founder of the distillery, which has 11 employees.
“Our fifth anniversary is coming up next May … and I am hoping we can make it to then,” he said.
An industry analyst says he expects a proposed White House plan to impose tariffs on imported vehicles and auto parts to move forward and have a negative impact on carmakers and dealers. (July 19) AP
‘Individual Americans will suffer’
In Cumberland, a town of about 2,200 residents in rural northwest Wisconsin, Ardisam Inc. has warned U.S. trade officials of the harm that a 25 percent tariff on Chinese goods could have on its business and the community.
Ardisam is one of the town’s largest employers, and over 58 years, its product line has grown to include hunting and fishing gear, garden equipment and the Yardbird Chicken Plucker for home poultry enthusiasts.
If left in place, the tariff stands to “completely eliminate” the profit on some products, according to the company.
“Put simply, two things could happen … the consumer will end up paying the tariff, or Ardisam will discontinue selling these products and reduce its workforce accordingly to adjust to the reduction in business,” company President Michael Furseth said in a letter this summer to U.S. trade officials.
“Under either scenario, individual Americans will suffer. In a town the size of Cumberland, the result of a workforce reduction would have a disproportionately negative impact on the entire community,” Furseth said.
The company added 42 jobs in the last three years in Cumberland, where it has about 140 employees. While most of its manufacturing is done in Asia, the jobs in Cumberland have an average wage of $52,000 a year.
Ardisam says it can’t easily sidestep the tariffs by finding other suppliers for things like electric log splitters.
“There is currently no large-scale manufacturing of these products happening in the U.S., and the amount of time and resources necessary to establish this level of manufacturing would undoubtedly jeopardize the industry as a whole and particularly Ardisam’s business and jobs in Cumberland,” Furseth said.
In Genoa City, a town of about 3,100 in Walworth County, Wisconsin, Electronic Specialties imports from China testing equipment, such as multi-volt meters used by automotive mechanics and homeowners.
“Maybe some people are absorbing the tariffs, but it’s hard to believe they could do that and stay in business,” said company president Steve White.
Electronic Specialties has only 10 employees. But that doesn’t preclude layoffs should its profit sink from rising costs.
“I know that if I were to lay someone off, it would be a big blow to their life,” White said.
Will pain be worth it?
Trump’s supporters say the short-term pain that some companies are feeling from the trade wars will be offset by the negotiation of better trade deals. And, supporters say, the U.S. is long overdue in standing up against practices such as China’s theft of American technology.
Even permanent higher tariffs on foreign-made goods wouldn’t be bad, supporters say, if it encourages companies to bring work to the U.S.
“It’s better to make these moves now while the economy is strong,” said Van Mobley, a Concordia University associate professor of history who follows trade issues.
“I think some of the tariffs on China are here to stay. … I wouldn’t bet on the Chinese making the changes we want,” Mobley said.
Manufacturers say they’re looking at every option to mitigate trade war damage. That could include sourcing products elsewhere to get around tariffs.
“As we move forward, everything is on the table, particularly with new programs where we haven’t set up the manufacturing yet,” said Austin Ramirez, president and chief executive officer of HUSCO International, in Waukesha. HUSCO manufactures components used in the automotive and construction equipment industries.
Ramirez said the higher tariffs have cost his company about $1 million a month.
“We have offset some of that, in various ways, but it’s still significant,” he said.
In the long haul, “it’s really impacting our competitiveness and future growth. That’s the scariest part for me,” he added.
Planning for the worst
Some manufacturers say they’re planning for the worst, not knowing whether the new tariffs are temporary or permanent.
“I think most companies are viewing this as the new status quo,” Ramirez said. “Then the question becomes, how do you adapt your business model to survive in this new paradigm?”
There’s a lot of uncertainty, said Mike VanderZanden, president of Amerequip Corp., a manufacturer in Kiel, in northeast Wisconsin.
“We’ve had a conversation with one of customers, debating how long we think the tariffs are going to be around. And the estimate was from six months to forever,” VanderZanden said.
Amerequip, which has 360 employees, has nearly tripled its annual revenue since 2012 to about $90 million this year.
But in the last six months it’s been hit with 30 percent higher costs for steel as domestic and foreign suppliers alike have raised prices in a global marketplace.
What started as a trickle is now more like a flood, said Dennis Slater, president of the Association of Equipment Manufacturers, a Milwaukee-based trade group representing construction and agricultural machinery companies.
President Donald Trump brought the world’s two biggest economies to the brink of a trade war Friday by announcing a 25 percent tariff on up to $50 billion in Chinese imports to take effect July 6. Here’s how it could affect the U.S. economy and consumers. (June 15) AP
The U.S. economy has been doing well enough that manufacturers and retailers have been able to absorb some of the rising costs, but it’s getting harder to do as the full weight of new tariffs settles in, according to Slater.
As early as Christmas, shoppers may see some higher prices as the impact of trade wars is felt in the marketplace.
That’s left consumer product companies nervous.
“It scares the hell out of me, to be perfectly honest, because I don’t know how the consumer is going to react,” said Marc Stevermer, director of operations for La Crosse Technology, the maker of home-based weather stations and other products.
Companies such as La Crosse could hold off on raising their product prices, hoping the new tariffs disappear, but that strategy could backfire should the trade wars continue to erode their profits.
“We would be marching ourselves off a cliff,” Stevermer said.
Even the cost of a good night’s sleep may go up, as baby cribs and mattresses are caught in the trade war with China.
Delta Children’s Products Corp. has a mattress factory and product design center in Neenah, in Wisconsin’s Fox Valley. The New York-based company says it is the world’s largest maker of baby cribs.
Many of its products and raw materials are imported from China.
The tariffs are making it harder for families to afford a new crib, said Joseph Shamie, Delta Children’s president.
“Now, more moms are going to turn to less safe hand-me-downs,” he said.
To sidestep the tariffs, the company has looked at moving manufacturing from China.
But that would take at least a year, Shamie said, and it would be a costly endeavor to establish another factory and line up suppliers.
“If we invest in the changes, and the tariffs go away, then we have wasted a lot of time and money. But if we don’t, and the tariffs continue, we have a huge problem,” he said.
Gary Reber Comments:
United States governments have allowed penalty-free outsourcing to happen over decades and we have become overly dependent on foreign-made materials and products. Yes, as a result of tariffs imposed on materials and products that have in the past not been taxed, or under taxed, upon entry into the United States, other countries are imposing tariffs on some of our exports, because they want to continue to take advantage of us. And yes, many businesses will be challenged with higher costs and lost business attributed to a breakdown in foreign trade. Outsourcing has meant that U.S. businesses hire foreign workers instead of Americans. According to reports, in 2013, U.S. overseas affiliates employed 14 million workers, not to mention the closing of manufacturing concerns in the U.S. and the investment in foreign countries, not the U.S. Since 2000, the U.S. has shed 5 million manufacturing jobs. Outsourcing to China cost the U.S. 3.2 million jobs since 2001. New research shows that more than three-quarters of jobs lost were in manufacturing. We have been effectively dismantling our manufacturing prowess.
But we need to stay the course to make it disadvantageous to outsource production to other countries and to incentivize businesses to produce in the United States, or more millions of manufacturing jobs will be shed.
Business is all about producing products at competitive efficiencies to maximize profits to their owners. Competition results in businesses constantly seeking to improve production efficiencies. This means a workforce that is efficient as well as a non-human workforce that is efficient. As technology advances, businesses are able to replace humans with non-human means of production. This has been a fact of business development throughout the world over the course of human development, and has resulted in tectonic shifts in the technologies of production. But who really benefits from this are, by organizational design, the OWNERS of the businesses. Unfortunately, the financial system, including the monetary and tax aspects, have been designed to benefit the wealthy capital asset (business worth values) ownership class.
As for the impact of tariffs on previously tariff-free outsourced production, whether to Mexico or China or elsewhere, as well as the continued incorporation of accelerated efficient production means made possible by advancing technologies, is to deplete production in the United States, which means less and less opportunity for jobs. Instituting tariffs is one means to incentivize producing in the United States and creating honest and fair trade policies.
The Wisconsin cases are indicative of the short-term pain of counter tariffs that will reduce demand for American-made goods.
As for those businesses outsourcing production it is indicative of how the wealthy capital asset ownership class reacts to having “the screws” of anti-outsourcing tightened. They want to continue to do what all businesses do to improve production efficiencies, in this case outside the United States, without being subject to a penalty when they import into the United States. Of course, they blame the tariff penalty as why jobs will be reduced. American businesses who have become accustomed to penalty-free out-sourcing want to continue to out-source with no tariffs attached to the products they manufacture outside the United States when imported into the United States. To me, out-sourcing is un-American and nothing to be proud about.
Americans need to wake up and demand legislation to reform the system to empower EVERY child, woman, and man to become an owner of expanding business productive capital assets ,whether that of current businesses or the formation of new viable businesses, with the aim of achieving universal individual citizen ownership of a future economy that can support general affluence for every citizen.
One such agenda is the enactment of the proposed Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) athttp://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/…/capital-homestead-act-a-plan-for-get…/, http://www.cesj.org/…/capita…/capital-homestead-act-summary/ andhttp://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version athttp://www.cesj.org/…/uploads/2014/11/C-CHAflyer_1018101.pdf and Capital Homestead Accounts (CHAs) at http://www.cesj.org/…/ch-v…/capital-homestead-accounts-chas/.
