Canadian Manufacturing

Tariff strife largely overlooked in runup to Tuesday’s U.S. midterms

The U.S. public has yet to feel the effects of ongoing trade wars. Industry, on the other hand, is all too aware of the impact


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CLEVELAND—As Donald Trump resumes the role of barnstormer-in-chief before Tuesday’s critical midterm elections, America’s ongoing tariff feud with friends and foes alike seems all but forgotten – at least for now.

Gone are the heady, dog days of summer, when curious Americans and visiting Canadians would linger on a Washington sidewalk alongside TV cameras, hoping to glimpse Foreign Affairs Minister Chrystia Freeland during her epic NAFTA battles with U.S. trade czar Robert Lighthizer.

Despite the new U.S.-Mexico-Canada Agreement, the U.S. president’s controversial Section 232 tariffs on steel and aluminum exports have persisted – to say nothing of his burgeoning trade war with powerhouse China. But neither has yet captured the attention of voters, experts say.

“As much as I thought that this is extremely important to everybody else, not everyone is aware of the impact that these trade issues are going to have on their own personal lifestyles,” said John Senese, president and CEO of the Cleveland-based Northeast Ohio Trade and Economic Consortium.

“Some of these things have not quite made their way directly into the consumers’ hands, or the people who actually see these things every day.”

A number of companies ramped up imports to mitigate the impact of the duties or spent the summer working through existing stock of raw materials, which means they haven’t yet been forced to adjust to the impact, he noted.

“I don’t see enough awareness in the public to say, ‘I really think this is a consideration that will sway my vote one way or another.’ Not yet. I see it in 2020, but I don’t see it today.”

Industry, on the other hand, is all too aware of the impact.

U.S. dairy farmers, stung particularly by retaliatory tariffs imposed by China and Mexico, have asked the Trump administration to increase aid to the sector in order to offset more than $1 billion in losses incurred since the levies were first imposed in May.

Those farmers do stand to benefit from increased access to Canada’s dairy market under the newly forged NAFTA successor, the USMCA, but a congressional vote on that deal is still a long way off – a formal signing in late November, with a congressional vote sometime next spring.

The National Milk Producers Federation estimates that the impact of retaliatory tariffs – in particular from Mexico and China, key export markets for U.S. dairy products – will have cost the industry $1.5 billion by the time the year is out.

In Ohio, soybean and corn producers are facing a loss of more than half their annual net income under a 25 per cent export duty imposed by China – which is the state’s single largest export market for the commodity but which is now importing soybeans from Brazil, said Ian Sheldon, an economist at Ohio State University.

“This is exactly what a trade economist would predict,” Sheldon said. “A tariff that discriminates against the U.S. but not Brazil would lead to Chinese imports being switched from the U.S. to Brazil, and that would drive down the price that U.S. farmers get.”

The White House imposed tariffs of 10 per cent on some $200-billion worth of Chinese products last month, a levy that’s set to increase to 25 per cent by the end of the year if the two sides can’t break the impasse. That’s on top of tariffs on $50-billion worth of Chinese goods already in place. China has, of course, responded in kind.

And while the automotive industry, which has been cowering at the prospect of Trump’s threatened 25 per cent duty on vehicles built outside the U.S., has largely weathered the storm so far, the tariffs have been making it difficult to accomplish the president’s ultimate goal – the “re-shoring” of jobs on American soil.

“One of the challenges we have right now is while we have tax refunds that clearly give us a benefit, the tariffs are eating away at that,” Ramzi Hermiz, the head of Ohio-based parts supplier Shiloh Industries, told a panel discussion in Washington last week.

“It’s holding us back from making some changes, and that lack of clarity – that lack of certainty over what’s next – is making people not move forward, so you’re not moving some jobs on shore.”

Retooling operations to use more homemade steel may sound simple, but in an elaborate manufacturing industry like auto parts, it’s a complicated process that incorporates time-consuming issues like quality control, safety standards, testing and validation, Hermiz said.

“We have to redefine our supply chain, and yet we’re not given time to redefine our supply chain, and we as the manufacturers are bearing that burden,” he said.

“We’ve demonstrated time and time again that the automotive industry, from the base supplier all the way to the original equipment manufacturer, knows how to handle disruption. We can manage change – if we have clarity and certainty.”

 

News from © Canadian Press Enterprises Inc. 2016

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