The ripple effects of President Trump’s trade war with China continue to find their way to the First State.
We’ve previously reported on the impact the tariffs he’s imposed are having in the retail sector, and the trouble they’re causing some Delaware farmers.
This week contributor Jon Hurdle examines how First State manufacturers are feeling the pinch – and efforts to mitigate that impact being led by Sen. Tom Carper.
The impact of President Trump’s tariffs on imported steel goods from China is going all the way to Clayton, Delaware, where Eagle Group, a manufacturer of steel equipment for commercial kitchens, is taking the hit.
The company, which employs about 400 people in its Clayton factory, is paying a 25 percent tariff on finished goods like stainless steel work tables or pot sinks, and is unable to pass the extra cost on to its customers because competition won’t allow it to raise prices.
“That’s not something that we can get back when we go to sell our products,” said Robin Dickerson, the company’s purchasing manager. “It’s something that we’re absorbing ourselves. Our competition is not increasing pricing, so we have to hold the line.”
Although finished goods from China represent a just small portion of Eagle’s business, the impact of the tariffs has been significant since they were imposed starting about a year ago, Dickerson said. The tariffs have not forced the company to cut its work force, but she said the reduction in profits has been significant. “It’s a very large sum of money. It’s a major hit to our bottom line.”
Dickerson and other Delaware manufacturers spoke in mid-October at an event held by the state’s senior U.S. Senator, Tom Carper, who is trying to build support for two bills that would give Congress more say in whether tariffs are used, and would stop a president using national security to justify imposing tariffs, as President Trump has done, as part of his “America First” policy.
“The founding fathers set up a system of checks and balances so that power and authority would not lie with one person,” Carper said in an interview after meeting with the manufacturers. Sharing power between three branches of government may not be the quickest or most direct way to govern, but it avoids giving too much power to any branch or individual. “It’s a hard way to govern but it’s the best we have found so far,” he said.
Carper said the stories of how Delaware businesses are being hurt by the tariffs underlines the need for the bills that would prevent a future president from unliterally imposing the charges.
“Bipartisan legislation supports the idea that there should be a sharing of authority and what I heard here today supports that,” he said. “Businesses need predictability and certainty; if they don’t have that, they are in real trouble.”
One of the bills, the Trade Certainty Act of 2019, was cosponsored by Republican Sen. Pat Toomey of Pennsylvania, and would prevent a president unilaterally imposing tariffs under the International Emergency Economic Powers Act, as used by President Trump.
The other bill, the Reclaiming Congressional Trade Authorities Act of 2019, would give Congress back the right to oversee trade matters after about a century in which it has delegated much of its trade authority to the president, Carper said in a statement. The bill, cosponsored by Sen. Tim Kaine, Democrat of Virginia, would also require the administration to assess the economic impact of potential tariffs before they take effect.
Both bills, Carper said, would stop the unilateral imposition of tariffs. “The idea that one person unilaterally, on a whim, can impose tariffs, that’s not a good idea.”
At Solvay Specialty Polymers, a Belgium-based company whose Newark facility makes plastic film for industries including telecoms, aerospace and medical, the uncertainty of tariff policy compounds the challenge of having to pay the charges.
“Meeting our predicted budget has been more difficult because of the unpredictability,” said Newark site manager Ed Scannell. “You don’t know when the next raw material price is going up.”
Scannell said the tariffs have affect the company’s bottom line, and some have resulted in price rises.
“We try not to pass them on to the customer, but ultimately, they sometimes end up being passed on,” he said. “So far, we’ve been able to minimize the impact. I think the customers are now expecting it because, across the board, everyone’s now raising prices.”
During the meeting with Carper, Scannell said the challenge was heightened by the short notice that importers of Chinese goods were given to comply with the tariffs, and the fear that further changes might be summarily imposed by the President.
“Waiting for a tweet to tell us what’s going to happen next creates a lot of that uncertainty,” he said.
Thomas Zawislak, general manager of B&W Tek, a Newark-based maker of spectroscopy devices, favored some kind of retaliation against China which he said does not “play by the rules” in international trade, but he doubted that tariffs are the answer.
“It’s not that the tariffs are in a position to level the playing field – although they are very, very high, and they are affecting us. It’s the fact that they were imposed with so much impact because no one was prepared.
“We should have had much more time, much more guidance, and then consistency in the application of how the tariffs are imposed,” he said. “How you can manage your business with these new tariffs? We had no time to prepare for that.”
B&W is being hit twice by the tariffs, Zawislak said: once by the U.S. levies on mechanical or electrical parts from China for partial assembly in Delaware, and again by the retaliatory Chinese charges on the products that the company ships back to China for final assembly.
Zawislak, who employs about 60 people, said he too has had to absorb the extra costs. “It’s affecting our margins. We can’t just say ‘hey, it’s going to cost another 25%’. We just wouldn’t be able to sustain our business.”
To cope with tariff compliance, the company has reassigned three people part-time from duties that would normally contribute more to the bottom line, he said.
He praised Carper’s trade bills, saying that Congress should have a greater say in determining whether, or by how much, to impose tariffs. “That balance has been lost, and this is a great initiative to bring that balance back,” he said.
Bryan Horsey, a spokesman for the Delaware Manufacturing Association, echoed his members’ concern that uncertainty over level and timing of tariffs is making it hard to run a business.
“In the absence of having a clear sense of where policy will land next week, let alone next year, it makes it very difficult for manufacturers to sufficiently budget, and predict what costs for materials or parts will be,” Horsey said in a statement after the Carper event. “Any level of unpredictability for a manufacturer is a problem, let alone one directly dependent on successfully meeting production demands.”
At Eagle Group, executives have considered cutting their imports of Chinese products like stainless steel work tables, and instead making them in-house, but those items would be more expensive if domestically made, and it would not be possible to quickly start that line of business. Besides, said Dickerson, the company has always prided itself on being a “one-stop shop” where customers could buy inexpensive “commodity” items like the work tables at the same time as high-end custom-made kitchen equipment.
Dickerson said before the meeting with Carper that she hoped to understand more about the rationale for the tariffs, and to find out where the money was going and when the charges might end. And she fears that the company will be hit by more tariffs, issued on a presidential whim.
“Just because Trump gets upset, he’s going to increase the tariffs at a moment’s notice,” she said.