Texas feels tariff pain
Manufacturing growing, but so is uncertainty about the future
Tariffs are hitting some businesses’ bottom line and heightening uncertainty for executives — even though manufacturing activity continues to grow.
Tariffs are hitting some Texas businesses’ bottom line and heightening uncertainty for executives — even though manufacturing activity continues to grow, according to surveys by the Federal Reserve Bank of Dallas.
The Dallas Fed in September asked 364 business executives in the manufacturing and service industries how tariffs were affecting their companies.
Just over one-third said tariffs are negatively affecting their company, and 45 percent reported no current impact. Five percent reported positive effects.
More than half reported increased uncertainty.
Manufacturers appear divided on the topic. Forty-seven percent of those surveyed said tariffs are negatively affecting their firm, but that figure fell to 39 percent when they were asked how the tariffs could affect them for the long term. Nine percent said tariffs are currently having a positive
impact on their business, with 15 percent expecting positive long-term effects.
“Many more Texas firms said that the tariff impact is negative than positive,” said Emily Kerr, Dallas Fed senior business economist, in a news release Monday. “The impact on manufacturers is a bit more polarized.”
Sixty-five percent of manufacturers said tariffs had increased their uncertainty.
One manufacturer said tariffs could open up a new market in China, and another speculated that tariffs could positively affect its finances. Others were unsure about the future impact, while some said tariffs had pushed prices up and affected inventory.
“We’re getting killed on aluminum pricing and potential availability,” one transportation equipment manufacturer said.
A metal manufacturer said the company “can pass on the cost increases, but our customers may not be able to pass them on if they compete with products made in Mexico, China or Asia.”
One machinery manufacturer said its input costs and prices had gone up, but customers “understand the situation and continue to buy our products.”
“The tariffs as best as I can tell will have little or no effect on anyone’s buying habits,” the company representative wrote.
Firms in San Antonio have seen minimal to “somewhat increased” impact from tariffs, depending in part on their size, said Rey Chavez, president and CEO of the San Antonio Manufacturers Association.
“Many companies find the tariffs difficult, but due to higher orders for their products they are adjusting and are making profits, which they in turn invest in their companies,” Chavez said. “Customers are the ones picking up the costs for steel and aluminum, and to date I haven’t heard many complaints.”
Manufacturers are worried about more tariffs and rising prices, and that’s contributing to feelings of uncertainty, he said. Still, “many agree the current course of action by the (Trump) administration is needed to stop the manipulation and subsidizing sell prices below cost,” Chavez added.
In the service sector, 30 percent reported negative effects and more than half said tariffs have no current impact on their business. Half said tariffs had increased their uncertainty.
“We have been on the receiving end of bad trade deals for a long time,” an educational services company told the Dallas Fed. “The short-term pain of tariffs is negligible as compared with the benefits of renegotiating trade deals not in our favor, but in a more balanced way. I stand behind the administration in this effort — it is long overdue.”
A real estate firm said input costs for construction materials are increasing in the midst of a project it’s working on.
“Tariffs will push new projects that are marginal to the sideline,” it said. “The economics don’t work.”
The Texas Manufacturing Outlook Survey, also released Monday, indicates that factory activity continued to grow in September but at a slower pace than last month.
Kerr noted that output growth has stayed strong for more than a year, though demand growth has slowed this quarter.
“This was another strong report for Texas manufacturing, although there are some signs that the expansion is moderating somewhat,” Kerr said.
Texas produces more than 11 percent of manufactured goods in the U.S., according to the Dallas Fed.