Local manufacturers feel the pain of aluminum, steel tariffs

With an increase in prices for steel and aluminum, the Mystic-based metal fabrication company Acme Wire Products is passing along the additional cost to customers, which are other manufacturers, who likely will pass along the costs, too.

The latter customers might be in the food processing, medical, furniture, automotive or sporting-goods industries. Take a company like Waterford-based Jaypro Sports, which manufactures sports equipment including batting cages, basketball hoop systems, goalposts, nets and tennis posts.

Jaypro absorbed the added costs for as long as it could, and stopped some of its discount programs. But if the company has to pass along the costs, school districts would be among those seeing the impact.

"Any budgets that school systems might've had allocated towards sporting goods equipment, throw that out the window, because they might've said, 'We need new basketball hoops or goal posts or whatever,'" said Mary Fitzgerald, president of Acme Wire. "They might not be able to purchase those this year, because the cost of them is going to be going up by x-factor."

This is what Fitzgerald sees as the trickle-down effect of President Donald Trump's tariffs on steel and aluminum, and other manufacturers in eastern Connecticut agree the tariffs are hurting them.

The U.S. placed tariffs — taxes on imports — on the commodities on March 8, initially exempting the European Union, Canada and Mexico. On May 31, Trump added those three, applying tariffs of 25 percent on steel and 10 percent on aluminum.

"We've been getting monthly price increases from our vendors," Fitzgerald said, "and also indications that there will be an inability to get material and an uncertainty on what will be available on lead times in the future."

Acme Wire had both domestic and Canadian suppliers, but with the 25 percent increase for Canadian steel, it is now using only domestic suppliers for raw material. Because these suppliers are farther from the factory than the Canadian ones, and because they have raised prices in recent months, costs are higher than they were before the tariffs.

The day of his March announcement, Trump tweeted, "Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!"

Manufacturers struggle with volatility of prices

Even manufacturers who exclusively buy American are seeing negative impacts from the tariffs because of increased demand. There's a "huge run on domestic steel," said Chris Jewell, chief financial officer of the Bozrah manufacturer Collins & Jewell.

"I understand the reason for the tariff, I understand the motivation, but I don't know if the capacity was really ready for the tariffs to be put in place as quickly," he said.

Inconsistency of pricing has been a problem for Collins & Jewell. A project might not come to fruition until six to eight months after the company's original estimate, and prices on steel and aluminum could rise dramatically during that time.

So Collins & Jewell either has to eat the cost or submit new pricing to the customer.

"If you put clauses in your projects for price escalation, you can mitigate this," Jewell said. "It's just a pain."

This kind of volatility also has been an issue for Kelli Vallieres, CEO of Sound Manufacturing in Old Saybrook and president of the Eastern Advanced Manufacturing Alliance.

Vallieres said pricing for steel and aluminum used to be stable for about six months but now suppliers won't give pricing past 30 days.

The Sound Manufacturing customers that could be feeling the effects include those in the industrial, automotive and telecommunications industries.

Other than steel producers, Vallieres struggles to see who is benefiting from the tariffs.

Elaine Adams, vice president of finance for Jaypro Sports, feels the same way, calling the tariffs a "knee-jerk reaction to a manufactured crisis." She said materials costs for Jaypro Sports have risen 12 to 20 percent.

Adams said she even got an invoice from a New England aluminum extruder that included the line item: "tariff." She's seeing longer lead times from her suppliers, indicating that they're struggling to get materials.

"What I see is a potential for a greater deal of hurt for American consumers," Adams said.

Economist Don Klepper-Smith of DataCore Partners believes that consumers on both sides of the ocean are going to lose. He sees the tariffs as being potentially detrimental to Electric Boat, Sikorsky and Pratt & Whitney, "right at the point where we're seeing a tangible uptick in manufacturing activity."

The last time he checked, Connecticut's manufacturing base is 117 percent of the national average, meaning it could stand to lose more from steel and aluminum tariffs than some other states.

Klepper-Smith's concern — though he said he is "not overly concerned" — is that tariffs are "protectionism in its purest form, and protectionism basically in the long run is inflationary, and inflation is not good for the economy because it erodes consumer spending power."

What does the future hold?

David Waddington, owner of Connecticut Scrap, has a more positive outlook on the tariffs than other business owners in the region.

"It did hurt us, in one way, but in another way, I'm willing to go the distance because the trade is not fair," he said. "It needs to be equal."

A lot of scrap metal the company handles goes overseas, and Waddington said Connecticut Scrap has taken a particularly hard hit on nonferrous metals, or ones that do not contain iron. This means it won't be able to pay people as much for their scrap metal.

He acknowledges that shuttered steel mills wouldn't be able to reopen overnight, but he stands by Trump's decision not to give more advance notice of tariffs, saying that "time is not on our side" and that "Trump is a mover and a shaker."

Waddington added, "You're going to have scrambled eggs before you get an omelet."

While the effects of the aluminum and steel tariffs have been visible for many Connecticut manufacturers, the verdict still is out on other, newer tariffs.

Tariffs on $34 billion in Chinese goods went into effect July 6. China responded by announcing $34 billion in tariffs on American goods, and on Tuesday, Trump proposed tariffs on $200 billion of Chinese products.

Hearings on the latest tariff proposal will be held at the U.S. International Trade Commission in August. The list of products is heavy on seafood, agriculture, fuels, automotive parts, household appliances and compounds with the kinds of names recognizable only to chemists.

Local impact measured

David Carey, director of the Connecticut Bureau of Aquaculture, doesn't envision seafood tariffs having much of an impact on Connecticut aquaculture.

As opposed to products that are shucked or frozen, Connecticut shellfish is "going to raw bar, premium-priced, and I don't think you're seeing the Asian shellfish in that market," Carey said. "We have a superior product for the half-shell raw market."

Patricia Richardson, publisher of The Day, voiced concern about the impact for small newspapers of tariffs on Canadian newsprint. She expects that by the end of the year, The Day will see a 31 percent increase in newsprint prices, and said that "we're going to have to look at all expenses."

But Richardson is hopeful about the Protecting Rational Incentives in Newsprint Trade Act of 2018, bipartisan legislation that seeks to protect printing and publishing industries by suspending tariffs until the secretary of commerce studies their impact. It is scheduled for a congressional hearing on Tuesday.

In looking at the U.S. placement of tariffs on $34 billion of Chinese goods and the retaliation from China on $34 billion of U.S. goods, Moody's Analytics calculated how much of the gross domestic product in each county is protected or hurt by tariffs.

According to the Wall Street Journal, 10.5 percent of industry GDP in New London County is hurt by tariffs while 9.2 percent is protected. New Haven, Fairfield, Litchfield and Windham counties are predicted to fare worse. Litchfield and Windham counties, the only two in the state that voted for Trump in 2016, would be hurt the most.

The data shows Middlesex County breaking even, while Tolland County is the only one that would see more of its GDP protected by tariffs than hurt.

e.moser@theday.com

Editor's Note: Editor's note: This version corrects the location of Acme Wire's suppliers. After the Canadian tariffs, the company turned to domestic suppliers, not overseas ones.

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