Tariffs take toll on state manufacturers
Rising costs, possible trade war bring out fears and uncertainty
At a recent town hall meeting held by U.S. Rep. Jim Sensenbrenner in Hartford, a local manufacturer complained vehemently about the new steel and aluminum tariffs imposed by President Donald Trump.
“I do recognize this is probably a negotiating tactic … the administration is using, but in the meantime real families are being crushed by these tariffs right now,” said Doug Reigle of Regal Ware, a company with 200 employees in West Bend that makes cookware and small kitchen appliances.
“We ship our products all over the world — 65 percent of our revenue comes from outside the United States … and the tariffs are hitting us especially hard,” said Reigle, who said his firm has already spent about $150,000 this year to cover the tariffs.
Since June 1, companies that buy steel and aluminum from Canada, Mexico and the European Union have felt the sting of a 25 percent tariff on steel and a 10 percent tariff on aluminum. The tariffs also have triggered countermeasures from U.S. trading part-
ners on a plethora of Wisconsin goods, including Harley-Davidson motorcycles, cheese, yogurt, pork, cranberries, sweetcorn, ginseng, wood, boats, paper and shoes.
The objective of the steel and aluminum tariffs, according to Commerce Secretary Wilbur Ross, was to reduce the trade deficit and shore up American metal producers.
The tariffs, essentially a tax on imported goods, also could be a bargaining chip in renegotiating the North American Free Trade Agreement.
All of Regal Ware’s aluminum comes from Canada.
“We can’t even buy it in the United States,” Reigle said. “Our competitors, which come from all over the world, aren’t subject to these tariffs. … So I’m now at a 25 percent disadvantage immediately on all those products.”
Every time the U.S. has imposed tariffs, it’s never worked out the way it was intended, according to Reigle.
Sensenbrenner told him that “one of the few things I disagree with the president on is the tariffs.”
The Menomonee Falls Republican said he was among 101 GOP lawmakers who wrote to the White House objecting to the steel and aluminum tariffs.
Sensenbrenner said he has received an “earful” about them from people in his district involved in manufacturing.
“They’re very, very afraid what’s going to happen is that they’re going to be increasingly non-competitive to goods, particularly the ones that come in from China,” he said.
“Those kinds of tariffs, if they end up being permanent rather than a negotiating tool on Trump’s part, are going to bring about retaliation. They’re going to bring about retaliation against manufactured products from the United States. And with us (in Wisconsin) being number two in per capita manufacturing jobs (in the U.S.), we’re going to get hit harder too.”
U.S. agriculture is bearing the brunt of the countermeasures already imposed by Mexico, equivalent to $2.62 billion of the targeted products.
That includes $387 million in tariffs on U.S. cheese, according to a report from S&P Global Market Intelligence, which tracks global commerce.
About 90 percent of Wisconsin milk is turned into cheese, and 90 percent of that cheese is sold outside of the state’s borders.
“Dairy farmers and processors simply cannot afford a trade war that will choke off access to major partners,” said Brody Stapel, a dairy farmer from Cedar Grove and board president of Edge Dairy Farmer Cooperative.
Mexico buys nearly a quarter of all dairy products exported by the U.S.
Cheese, yogurt, pizza, cucumbers, soups and prepared meals are some Wisconsin food products on Canada’s list of items slated for tariffs.
“We think it’s going to be pretty devastating to us,” said Jeff Schwager, president of Sartori Cheese in Plymouth.
“Uncertainty is the killer. If these tariffs go into place, what will they be? And how long will they last? We are in uncharted territory,” he said.
Sartori, which buys milk from 130 Wisconsin dairy farms, exports products to 49 countries.
U.S. cheesemakers were at a trade disadvantage with the European Union even before the threat of additional tariffs, according to Schwager.
“We pay a dollar a pound (of cheese) for import duties into Europe,” he said.
The Mexican tariff on U.S. pork is 10 percent, escalating to 20 percent July 5.
It “eliminates our ability to compete effectively in Mexico,” said Jim Heimerl, president of the National Pork Producers Council.
“The toll on rural America from escalating trade disputes ... is mounting,” he said.
About a quarter of Wisconsin’s pork goes to Mexico, and anything that hurts those sales would be felt by farmers who are already just barely turning a profit.
Food manufacturers, such as Johnsonville Sausage in Sheboygan Falls, also are vulnerable in trade disputes.
Johnsonville ships products to about 35 countries.
Michael Stayer-Suprick, who leads the company’s international business division, says he’s concerned about trade wars.
“However, for where we need to be as a country with our trading partners, to me this is a short-term hurdle that’s well worth us trying to overcome,” he said. “I think this will be short-term pain for, hopefully, a long-term gain in better relationships on both sides of our borders.”
Wisconsin manufacturers of lawn and garden equipment also stand to take a hit from the tariffs through reduced sales to Canada and higher steel and aluminum costs that threaten to drive up prices of their products.
“Who loses? It’s the consumer,” said Kris Kiser, president of the Outdoor Power Equipment Institute, a trade group that represents manufacturers such as Briggs & Stratton Corp., Kohler Co. and Ariens Co.
“We are very disappointed with the current tariffs, the back and forth, and the tariff war that doesn’t suit anyone’s interest,” Kiser said. “This is what happens when you interfere in the marketplace.”
Ariens Co., based in Brillion, buys steel made in the U.S. and Canada.
The maker of garden tractors and snow throwers is bracing for higher raw material costs that could place its products at a price disadvantage to equipment made overseas.
“It’s definitely going to be a significant challenge,” said Ariens spokeswoman Ann Stilp.
Last fall, a week after Trump called Canada a “disgrace” for trade policies that hurt Wisconsin dairy farmers, he slapped tariffs of up to 24 percent on Canadian softwood lumber — material that’s used in the building industry.
Canada has since threatened tariffs on U.S. plywood, boards, paper and other wood-based products, including furniture. Trade disputes drive up buildingsupply prices and raise housing construction costs. Likewise, disputes over paper products can be damaging.
Early this year, the Commerce Department imposed steep tariffs of up to 32 percent on newsprint from Canada. That’s boosted profits for the few remaining U.S. newsprint mills, but it’s raised prices for hundreds of print publications.
There’s a “fundamental difference” between tariffs on China and tariffs on Canada and Mexico, said Jeff Landin, president of the Wisconsin Paper Council.
Tariffs on aluminum used for beer cans “does kind of hit home” in Wisconsin, Sensenbrenner said.
American brewers fill and sell about 36 billion aluminum cans and bottles per year. Those cans hold 62 percent of the beer volume sold in the U.S., according to the Beer Institute that represents the industry.
Aluminum cans are the single largest cost in U.S. beer production, according to an analysis from the economic research firm John Dunham & Associates.
“The aluminum tariff is a tax on beer and will have severe consequences for brewers,” John Dunham said.
Beer drinkers will “ultimately” bear the cost of it, he said.