Months of anx­i­ety for man­u­fac­tur­ers in Wis.

The Denver Post - - BUSINESS - By Ivan Moreno

MEQUON, WIS.» The trade war be­tween the United States and China has made for a nerve­wrack­ing sum­mer and fall of un­cer­tainty in Wis­con­sin, where man­u­fac­tur­ing has long been in de­cline yet re­mains a vi­tal part of the state’s econ­omy.

At John­son Level and Tool in sub­ur­ban Mil­wau­kee, the Trump ad­min­is­tra­tion’s thrust­and­parry trade moves with China and other coun­tries have left the com­pany brac­ing for up to $3.7 mil­lion in ex­tra costs an­nu­ally be­cause of higher tar­iffs on im­ports, in­clud­ing some of its lev­els that are made in China.

The com­pany has a range of op­tions to try to blunt its higher costs — from rais­ing prices on the lev­els it sells to big box stores to po­ten­tially mov­ing some of its man­u­fac­tur­ing now done in China to an­other coun­try to avoid tar­iffs.

But as com­pa­nies across Amer­ica strug­gle to adapt to the higher prices from im­port taxes, the op­tions that of­fi­cials at John­son Level and Tool face un­der­score there are no easy an­swers — and no sure way to avoid pay­ing more for in­dis­pens­able im­ports. As Trump’s tar­iffs on count­less U.S. im­ports take root, some of the largest U.S. cor­po­ra­tions have warned that higher prices are com­ing.

For many such com­pa­nies, a key in­ter­nal ques­tion is whether to ab­sorb the higher costs them­selves, at least tem­po­rar­ily, to avoid los­ing cus­tomers — or raise prices im­me­di­ately. John­son Level has cho­sen to raise its prices for the stores that buy its prod­ucts by 8 per­cent to 10 per­cent to match its higher costs im­posed by the tar­iffs.

Lev­els are a ba­sic tool es­sen­tial for things such as get­ting door­ways square and hang­ing pic­tures straight. Though John­son man­u­fac­tures some of its lev­els in Mequon, it im­ports oth­ers that are cheaper to make in China be­cause their tool­ing ma­chines cost just one­tenth what they do in the U.S., said Paul Buzzell, the com­pany’s chief fi­nan­cial of­fi­cer. About half the lev­els the com­pany sells are im­ported from China.

The un­cer­tainty over how long the tar­iffs will re­main in place has made it harder to find a so­lu­tion, Buzzell said. He said he al­ways as­sumed that if the U.S. in­creased tar­iffs, it would give busi­nesses a year or two to pre­pare by mak­ing ad­just­ments with their sup­pli­ers.

That was the as­sump­tion, he said, when the com­pany “started in­vest­ing in our sup­pli­ers and re­la­tion­ships in China.”

“We have this un­cer­tainty, and al­most overnight our busi­ness re­ally has changed,” Buzzell said.

The first tar­iffs on Chi­nese steel and alu­minum in June didn’t af­fect John­son Level; the com­pany doesn’t im­port those raw ma­te­ri­als. But in July, a se­cond round of tar­iffs on $50 bil­lion of Chi­nese im­ports cov­ered hun­dreds of items, in­clud­ing all the lev­els and laser lev­els the com­pany im­ports, mean­ing they were now pay­ing 25 per­cent more for those.

De­spite its de­cline over the years, man­u­fac­tur­ing still plays a cen­tral role in Wis­con­sin’s econ­omy, mak­ing the sur­vival of com­pa­nies such as John­son Level es­sen­tial to the state.

About 16 per­cent of Wis­con­sin’s work­force is in man­u­fac­tur­ing — se­cond only to In­di­ana, ac­cord­ing to the Na­tional As­so­ci­a­tion of Man­u­fac­tur­ers.

And global trade — whether in­volv­ing man­u­fac­tur­ing, farm­ing or other in­dus­tries — sup­ports about 800,000 jobs in the state, ac­cord­ing to the ad­vo­cacy group U.S. Cham­ber of Com­merce. That’s ap­prox­i­mately a quar­ter of the state’s to­tal work­force.

In busi­ness since 1947, John­son Level and Tool sells lev­els and mea­sures tools for stores na­tion­wide, in­clud­ing Home Depot, Me­nards, Lowe’s and Ace Hard­ware.

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