Tariffs on Mexico are causing layoffs in U.S.
Missouri nail factory’s orders are down 70% from a year ago
POPLAR BLUFF, Mo. — When a Mexican company bought Mid Continent Nail Corp. in 2012, workers at the factory here feared it was the beginning of the end. Their jobs, they suspected, would be given to lowerpaid workers in Mexico, more casualties of the hollowing out of U.S. manufacturing driven in part by an embrace of global trade.
Instead, Mid Continent’s factory has doubled in size since Deacero’s purchase. The company, facing fewer restrictions on steel exports after the North American Free Trade Agreement, shipped steel into Missouri, willing to pay skilled workers more to take advantage of cheaper energy costs in the United States and a location that allowed swift delivery to U.S. customers.
But President Donald Trump has put 25 percent tariffs on steel imports, bumping production costs and prompting Deacero to reconsider this arrangement. With Mid Continent charging more for nails, orders are down 70 percent from this time a year ago despite a booming construction industry. Company officials say that without relief, the Missouri plant could be out of business by Labor Day — or that remaining production could move to Mexico or another country.
And so trade restrictions aimed at preventing U.S. jobs from heading to Mexico and elsewhere have instead hampered a Mexican company’s multimillion-dollar effort to create jobs in the United States — an unintended consequence of Trump’s trade war that demonstrates how attacking trading partners hurts workers at home. The layoffs have already begun. The company now employs fewer than 400 workers, down from about 500 before the tariffs took effect last month.
“We’re in a situation where we’re fighting against our own country,” said Chris Pratt, operations general manager at Mid Continent.
Deacero is trying to decide what it will do next. For now, it is using the steel it once exported to the United States in production facilities in Mexico, which make wire products for the domestic market. But the future remains hazy.
“Obviously, moving nail production to Mexico or another country is a possibility, but it is a bad alternative. Mid Continent does not want to move and is not planning to do so,” company spokesman Jim Glassman said. “The workers there continue to hope and expect that President Trump will save their jobs.”
Philip Bennett, 37, a machine repairman at Mid Continent, appeared close to tears as he talked about his 5-year-old daughter, Aubree, who has a congenital heart condition that has required multiple surgeries. His health insurance through Mid Continent covers her.
“There’s a lot of good things that he is doing. But he’s affecting me now, and I don’t appreciate it,” Bennett, a Trump supporter, said of the president.
But while workers in Missouri fear additional layoffs, not one Mexican employee has been fired.
“The strength of the domestic market [in Mexico] has helped us,” Luis Leal, Deacero’s vice president of trade, said in a phone interview from the company’s headquarters in Monterrey, Mexico.
Trump imposed tariffs on steel and aluminum imports June 1 by invoking a rarely used provision that permits the president to swiftly penalize imports on the grounds of national security. Combined with broader actions aimed at Mexico, Canada, the European Union, China and other trading partners, the tariffs represent a fulfillment of Trump’s campaign promises to, in the president’s view, rescue U.S. workers from what he termed the “American carnage” wrought by international trade deals.
While the 25 percent tax on steel imports has helped the domestic steel industry, it also raised costs for U.S. firms. Mid Continent used to sell a box of 50 nails for $27. Now, it tacks on $5.50 to cover the cost of the tariff, company officials said.
Firms can apply to Commerce for waivers from the steel and aluminum tariffs if they can show that the products they seek to import cannot be obtained in the United States in sufficient quantity or quality.
But only after the tariffs were imposed in June did the agency begin training the roughly 30 evaluators who must review at least 21,000 relief petitions.
The tariffs’ effects on MidContinent and Deacero demonstrate why economists broadly say protectionism can do more to damage the economy than to grow it. And experts say Trump’s trade policy risks dampening foreign investment in the United States, as firms are uncertain about future trade rules.
Between 2005 and 2016, Mexican foreign direct investment in the United States quadrupled to $17 billion — supporting more than 123,000 American jobs.