Tariffs set to go into effect today on steel and aluminum have drawn praise from the head of one of the nation’s union organizations and Ohio’s Democratic senator but some Springfield manufacturers warned of unintended consequences and higher costs for customers.
Proponents of the tariffs argued they are necessary to protect American steel workers and a critical industry.
“This is a great first step toward addressing trade cheating, and we will continue to work with the administration on rewriting trade rules to benefit working people,” said Richard Trumka, president of the AFL-CIO, a federation of 55 national and international labor unions.
President Donald Trump’s plan would add tariffs of 25 percent on steel and 10 percent on aluminum products imported from other countries. It would temporarily exempt Canada and Mexico, as well as the European Union and several other countries. Trump justified the need for tariffs on national security grounds.
In Springfield, manufacturing firms like Pentaflex would likely face higher costs, even though most of the steel it purchases comes from American sources, Executive Vice President Ross McGregor said.
“I’m not saying there’s not an issue with the dumping of steel, particularly by China,” said McGregor, a former Republican state representative. “But an across-the-board, 25 percent tariff is not very thoughtful.”
Pentaflex specializes in producing complex parts for the auto and trucking industries, including customers like Navistar. Steel is used for many of the parts manufactured by Pentaflex. If prices for those products increase, that means his company either has to absorb the cost or pass the higher prices along to customers. Ultimately that may mean higher prices for consumers, McGregor said.
“There are far more people employed doing the work at Pentaflex and companies like mine than there are in steel producing,” McGregor said. “It just doesn’t seem like it’s a completely well-thought out plan to help one segment of the supply chain at the expense of the other.”
Trump’s proposal has gained support from U.S. Sen. Sherrod Brown, D-Ohio, who said the tariffs were overdue. The move sends a message to U.S. trading partners that the government is willing to enforce trade rules, Brown said.
“For far too long, Chinese cheating has shuttered steel plants across our state and put Ohioans out of work,” Brown said when Trump announced the tariffs. “Today’s action finally sends a clear message to our trading partners that we aren’t going to allow them to cheat Americans out of their jobs and infect global markets. By standing up for steel jobs today, we’re also protecting American jobs up the supply chain from becoming the next victims of Chinese cheating.”
Some of the region’s largest employers said the tariffs are likely to raise prices for U.S. consumers.
“Honda extensively sources its steel and aluminum from U.S. suppliers,” said Chris Abbruzzese, a spokesman for Honda. “However, history has shown that tariffs imposed on imported steel could raise prices on both domestic and imported materials, thus causing a financial burden on our customers.”
About 1,400 workers from Clark and Champaign counties work for the automaker, and it employs about 14,500 Ohioans overall.
Navistar, another major employer in Clark County, recently discussed the tariffs during a conference call with investors. Lyndi McMillan, a spokeswoman for Navistar, said the truck maker believes the tariffs would have a minimal impact in the short term because the company anticipated higher commodity prices for 2018, and more than 90 percent of the company’s steel purchases and 100 percent of its aluminum is sourced within NAFTA countries.
“Navistar supports policies and regulations that create open markets to allow U.S. products to compete globally,” McMillan said. “We’ve reviewed the executive order and we appreciate that NAFTA countries are exempt. As for the tariffs, we believe any impact on Navistar will be minimal in 2018 and manageable within our guidance for the year.”
Trump has accused China and other countries of predatory practices that have made it difficult for U.S. steel makers to compete.
But the real issues that have led to fewer steel jobs are more complicated, said Edward Hill, a professor at Ohio State University and the Ohio Manufacturing Institute. Trump’s tariffs might provide some benefit to workers directly employed at steel mills, Hill said, but the plan is so vague it’s hard to know whether companies that refine or process raw steel products might be affected, Hill said.
“This proposal has all the thought of a couple drunk grandfathers on Thanksgiving dinner making up the rules for a touch football game,” Hill said.
China has been blamed for unfair trade practices that harm U.S. workers, but Hill said other factors have played a much larger role in declining U.S. steel employment.
For example, most manufactured products contain more plastics and composites and fewer steel parts than in past decades. Workers are also far more productive than they were years ago. Hill pointed to statistics that showed in 1992 it took 10 hours of labor to make a ton of steel. In 2016 the industry-wide average was 2 hours.
And U.S. steel mills are likely to raise their own prices if they face less foreign competition, Hill said.
“It isn’t clear that anyone outside of a mill will get direct benefit,” Hill said. “The raw material costs for these folks that re-manufacture the steel, even if they buy domestic steel, it’s going to go up because Mother Teresa doesn’t run the billing department of a steel mill.”
One other factor to consider is the likelihood countries not exempt from the tariffs will retaliate, sparking a trade war, said Larry Glinn, an associate professor of economics specializing in international trade and finance at Wittenberg University.
“That will harm some other industry,” Glinn said. “Typically when a country like the U.S. unilaterally imposes tariffs, eventually there’s going to be retaliation.”