Businesses speak out on tariffs
Trade wars increase restaurant costs for food, appliances
In the restaurant business, where raising prices on something like a Friday night fish fry could cause some folks to lose their appetite, the impact of the global trade wars is settling in.
❚ Tariffs the U.S. placed on foreign steel and aluminum, for example, have made ovens, refrigerators and dishwashers more expensive.
❚ China is nearly the exclusive source for stainless steel used by equipment makers, said Susan Quam, executive vice president of the Wisconsin Restaurant Association.
Many other items, including seafood, also are subject to higher tariffs — a tax on imported and exported goods — in the tit-for-tat trade war with China and Europe.
At some point, it could raise the price of the Friday night fish fry, a cherished Wisconsin tradition that keeps many restaurants afloat.
“It involves a lot of haddock, cod and pollock. And while a lot of that fish may be caught in U.S. waters, or in Canada, most of it is processed in China,” Quam said.
“So when the next round of tariffs is implemented, we are going to see some pretty hefty increases in just those costs alone,” she added.
Quam was one of eight panelists at a town hall meeting Thursday about the impact of tariffs on manufacturers, agriculture and other businesses.
Republican Sen. Ron Johnson was also there to hear complaints about the trade wars triggered this year when President Donald Trump imposed steep tariffs on foreign steel and aluminum.
The Trump administration has embraced a tariffs strategy that’s hit billions of dollars in products, with more to come next year.
“This is an executive branch issue, and our president has been very transparent that he really believes tariffs are an effective policy to address trade imbalances,” Johnson said. “I think that’s wrong, but there’s one person we need to
“Tariffs ultimately hurt U.S. companies and U.S. consumers more than they hurt our foreign counterparts.” Austin Ramirez Husco International President
convince to make a change ... and it’s somebody in the White House,” he added.
The town hall meeting, attended by about 100 people, was at Husco International, a Wisconsin-based company that makes hydraulic and electro-mechanical components for vehicles and construction equipment.
Higher tariffs cost Wisconsin companies $95 million in August, up 47 percent from a year earlier, according to new data from Tariffs Hurt the Heartland, a business group behind the town hall meetings being held in several cities.
The restaurant industry was part of the discussion because various products, from seafood to stoves, are subject to higher costs from trade wars.
It’s tough to pass the additional costs on to consumers through higher prices on the dinner menu, according to Quam.
“Wisconsin consumers are pretty price sensitive. They don’t want to see their Friday night fish fry go up a dollar, because that’s a big deal,” she said.
The typical restaurant operates on only about a 4 percent profit margin, according to Quam.
“Our industry is under a ton of pressure on the pricing side . ... There’s not a lot of room for error,” she said.
Supporters of the trade wars say the short-term pain some industries are feeling will be offset by the negotiation of better long-term trade agreements.
And, supporters say, the U.S. is long overdue in standing up against practices such as China’s theft of manufacturing technology.
About 16 percent of Wisconsin’s workforce is in manufacturing, second only to Indiana, and global trade — from manufacturing, agriculture and other industries — supports roughly 800,000 jobs in the state, according to the U.S. Chamber of Commerce.
“I think the negotiations the Trump administration is doing actually play very well for Wisconsin. Once (businesses) understand that change is inevitable, and they have to move forward, I think they will be fine,” said Van Mobley, a Concordia University associate professor of history who follows trade issues but was not one of the town hall panelists.
Yet many manufacturers disagree, saying that trade wars and tariffs are not
At Husco International, Dwayne McDonald (left) shows Mery Bayas how to run a workstation on a production line that makes a sub-component for an oil control valve used in the automotive industry.
only expensive, they could put the brakes on what’s been strong economic growth.
GenMet, a metal fabricator in Mequon, says the price it pays for stainless steel has jumped 62 percent since February, and that some metal prices have more than doubled.
The company has passed some, but not all, of the increase on to its customers.
“We’ve been sharing the pain with them,” said GenMet President Mary Isbister.
Raw material prices are now unpredictable, and some materials are in short supply, according to Isbister.
Trade wars have a chilling effect on long-term economic growth and could have the unintended consequence of sending work overseas, according to manufacturers at the town hall meeting.
“The uncertainty caused by tariffs and increased prices, and whether or not your customers are going to continue accepting price increases … all ends up in less investment. Eventually it’s going to catch up with us,” Isbister said.
“My personal gut feeling is the president has chosen to implement tariffs, and to remove the country from some of our free trade agreements, more for political reasons than for a true understanding of how it’s going to impact our economy,” she added.
U.S. farmers remain hopeful that new trade deals with Canada and Mexico could help lift them out of a price slump, but the global market remains flooded with agricultural commodities, and tariffs from China and the European Union are making it harder for American farmers to sell their goods overseas.
“An improved agreement with one country is not going to solve the situation,” said Jim Holte, president of the Wisconsin Farm Bureau Federation and one of the town hall panelists.
China has slapped higher import duties on U.S. agricultural products to hurt farmers who backed Trump in the 2016 election and who are represented by powerful members of Congress. Sales of U.S. soybeans to China have nearly dried up.
“My expectation for China is it’s going to take multiple years before we come to any agreement or solution with them. As much as I would love to tell you we could fix this in six months, I don’t believe that’s true,” Holte said.
Manufacturers say they’re looking at every option to mitigate trade war damage, including sourcing products from countries not caught up in the disputes.
Husco International President Austin Ramirez said higher tariffs this year have cost his company more than $1 million a month.
In the long haul, “It’s really impacting our competitiveness and future growth. That’s the scariest part for me,” he said.
Some have argued that tariffs are a necessary hammer in negotiating trade agreements. Ramirez said there are better ways to deal with countries and companies engaged in unfair trade practices.
He pointed to an example, from this summer, when the U.S. and China reached a deal that allowed the Chinese telecom company ZTE to stay in business in exchange for paying an additional $1 billion in fines and agreeing to let U.S. regulators monitor its operations. ZTE had already paid $892 million in fines for breaking U.S. sanctions by selling equipment to North Korea and Iran.
Unlike tariffs, the fines punished a company for wrongdoing but didn’t bring down others that weren’t involved in the violations, Ramirez said.
He added: “Tariffs ultimately hurt U.S. companies and U.S. consumers more than they hurt our foreign counterparts.”