TRUMP TRADE WAR WIN­NERS, LOSERS

The Charlotte Observer (Sunday) - - Front Page - BY DEON ROBERTS, JIM MORRILL AND HAN­NAH LANG der­[email protected]­lot­teob­server.com jmor­[email protected]­lot­teob­server.com [email protected]­lot­teob­server.com

Tar­iffs are rais­ing prices for Char­lotte con­struc­tion com­pa­nies, farm­ers and craft brew­ers. But a lo­cal steel pro­ducer ben­e­fits from higher prices.

Drew Medlin sees the im­pact of the trade war in the fall­ing prices for his Union County soy­beans.

Glenn Sher­rill sees it in the sky­rock­et­ing prices for the steel that’s build­ing Char­lotte’s sky­line.

And Todd Ford sees it in the ris­ing cost of alu­minum cans at his Char­lotte brew­ery.

They are part of the col­lat­eral dam­age al­ready be­ing felt around the Char­lotte re­gion from Pres­i­dent Don­ald Trump’s bur­geon­ing trade war.

That fight es­ca­lated this month with tar­iffs on $34 bil­lion worth of Chi­ne­se­made goods while China en­acted tar­iffs of its own. Ear­lier, Canada and the Euro­pean Union re­tal­i­ated against Trump’s tar­iffs on steel, alu­minum, mo­tor ve­hi­cles and hun­dreds of other items. More tar­iffs are in the pipe­line.

The U.S. Cham­ber of Com­merce says $1.1 bil­lion in North Carolina ex­ports are threat­ened by a trade war, in­clud­ing a half-bil­lion dol­lars worth of ex­ports to Canada and $350 mil­lion to China.

Tar­iffs are im­pact­ing not only busi­nesses, builders and grow­ers, but also con­sumers who will see higher prices for things like ap­pli­ances, cars and houses. Mul­ti­mil­lion­dol­lar projects are in dan- ger of be­ing post­poned or can­celed.

In Union County, Medlin, 34, is deal­ing with the im­pact on the 3,500acre farm he runs with his fa­ther.

“It’s a dark cloud, and it doesn’t go away,” said Medlin. He said he’s seen soy­bean prices fall about $2 per bushel in re­cent months over con­cerns about po­ten­tial tar­iffs from China, a ma­jor im­porter of U.S. soy­beans.

“I’m hop­ing that we can at least make it the next cou­ple of years and try to weather the storm, and maybe some­thing pos­i­tive will come out of it,” he said. “That’s all you can hope for.”

WIN­NERS AND LOSERS

The tar­iffs are cre­at­ing win­ners as well as losers.

Nu­cor, a Char­lot­te­based steel man­u­fac­turer, is ben­e­fit­ing from higher prices for U.S. steel in the wake of 25 per­cent tar­iffs on steel im­ports.

“Nu­cor sup­ports the

gov­ern­ment’s ef­forts to stop the flood of il­le­gally sub­si­dized and dumped steel im­ports into the U.S.,” CEO John Fer­riola said in a state­ment. “Tar­iffs send a strong mes­sage that dump­ing ar­ti­fi­cially cheap steel prod­ucts into our mar­ket will no longer be tol­er­ated.”

Mark Vit­ner, se­nior econ­o­mist for Wells Fargo Se­cu­ri­ties in Char­lotte, said steel pro­duc­ers like Nu­cor will ben­e­fit as prices rise and they are able to win back mar­ket share lost to over­seas pro­duc­ers.

“The tim­ber and lum­ber in­dus­tries are also ben­e­fit­ing and we have seen in­creased in­vest­ment in lum­ber yards through­out the Caroli­nas,” he said. “Of course higher prices for steel and lum­ber mean that it is more ex­pen­sive to pur­chase things made with them.”

At least in the short run, tar­iffs are boost­ing sales of do­mes­tic ve­hi­cles by rais­ing the prices of im­ports.

“My phone has been ring­ing off the hook with peo­ple who want to buy cars now,” said dealer Felix Sa­bates, who sells Fords as well as Mercedes-Benz au­tos. He said he’s seen a dra­matic in­crease in sales re­cently as cus­tomers at­tempt to buy ve­hi­cles be­fore prices go up.

But Sher­rill, chair­man and CEO of SteelFab, a Char­lotte steel fabri­ca­tor, has seen the cost of his raw prod­uct jump by as much as 50 per­cent.

“There’s very lit­tle for­eign steel com­ing into mar­kets now be­cause of tar­iffs,” he said “It’s al­lowed do­mes­tic mills to hike prices... I cer­tainly am wor­ried that if the tar­iff pro­gram stays in place it’s go­ing to im­pact com­mer­cial con­struc­tion.”

Rich Cer­retti, Char­lotte- based vice pres­i­dent of JE Dunn Con­struc­tion, is con­cerned about that too.

“The Char­lotte of­fice has four to five projects in the pipe­line,” he said. “I re­ally worry that those will be... de­layed or stopped.”

A HOLD­ING PAT­TERN

In Union County, Medlin said the drop in soy­bean prices has led him to side­line equip­ment pur­chases and hir­ing. The beans are the largest and most prof­itable crop grown at the ap­prox­i­mately 65-year-old farm, which em­ploys four other peo­ple.

The price de­cline comes as farm­ers were al­ready cop­ing with a six-year­long drop in soy­bean prices, Medlin said, adding that it’s tough to make a profit at the cur­rent prices.

“Right now it’s just a hold­ing pat­tern,” said Medlin. “We hope that right now we’re at a bot­tom point.”

Lower prices are hurt­ing farm­ers all over the Char­lotte re­gion, home to some of the big­gest soy­bean farms in the state, said Kather­ine Stowe, in­terim CEO of the North Carolina Soy­bean Pro­duc­ers As­so­ci­a­tion. By acreage, soy­beans are the largest crop in North Carolina, where about 1.6 mil­lion acres have been planted this year, she said.

“The tar­iffs are def­i­nitely af­fect­ing our farm­ers from one end of the state to the other for both soy­beans and other com­modi­ties,” Stowe said. “But our grow­ers, while they feel the pain ... in the long run they’re hope­ful other mar­kets will open up, or for bet­ter trade deals in the fu­ture.”

HOUS­ING HIKES

Among the Chi­ne­se­man­u­fac­tured prod­ucts hit with new 25 per­cent tar­iffs this month are com­pres­sors used in re­frig­er­a­tors and air con­di­tion­ers.

Cou­pled with the dra­matic jump in steel prices, that’s a dou­ble whammy for ap­pli­ance man­u­fac­tur­ers such as Elec­trolux, whose U.S. head­quar­ters is in Char­lotte.

Spokes­woman Eloise Hale said the com­pany had to in­crease prices to re­tail­ers, al­though she de­clined to say how much. Elec­trolux also put on hold a planned $250 mil­lion in­vest­ment in its Spring­field, Tenn., man­u­fac­tur­ing plant.

Mean­while, tar­iffs on Cana­dian lum­ber have raised prices on new homes, said Rick Jud­son, owner of Char­lotte-based Ev­er­green Group, a de­vel­oper and build­ing con­trac­tor.

As de­mand re­mains high, for­est fires and dis­ease have con­strained sup­ply and led to a “ne­ces­sity and de­pen­dency” on im­ported lum­ber, Jud­son said.

That plus the tar­iffs equate to a $ 7,000 to

IT’S A DARK CLOUD, AND IT DOESN’T GO AWAY. Drew Medlin, soy­bean farmer, on the im­pact of Trump’s trade war

$9,000 in­crease in the cost of con­struct­ing a new home, a price that is trans­ferred al­most di­rectly to home­buy­ers at a time when de­mand re­mains high. North Carolina saw 74,300 new hous­ing starts in May, ac­cord­ing to the Fed­eral Re­serve Bank of Rich­mond, up 37 per­cent from the year be­fore.

Com­mer­cial con­trac­tors are also feel­ing the pain.

Cer­retti, of JE Dunn, said with con­tracts locked in, the im­pact on cur­rent projects is neg­li­gi­ble. It’s fu­ture ones that would be af­fected if the trade war con­tin­ues. “If it con­tin­ues for long enough... prices will go up,” Cer­retti said.

‘A LOT OF CON­CERN’

Todd Ford, founder of NoDa Brew­ing Co., said prices of his alu­minum cans has jumped 10 per­cent. While that ac­counts for a rel­a­tively small por­tion of his over­all pro­duc­tion costs, he wor­ries that tar­iffs could raise the costs of stain­less steel tanks in any fu­ture ex­pan­sion.

Vit­ner, the Wells econ­o­mist, noted an ar­gu­ment could be made that steel and lum­ber prices were too low pre­vi­ously, as those items were “dumped” into the U.S. at ar­ti­fi­cially low prices.

“The cost of that dump­ing was lost jobs and wages, pri­mar­ily in ru­ral parts of the Caroli­nas,” he said.

Bob Morgan, pres­i­dent of the Char­lotte Cham­ber, has been sur­vey­ing cham­ber mem­bers about the tar­iffs. He said the re­sponse is run­ning 2-1 against them.

“There’s a lot of con­cern that the tar­iff war es­ca­lates into some­thing that slows eco­nomic growth across the board,” Morgan said.

“I sense that there’s a real ‘anx­ious pa­tience’ com­ing from a lot of busi­ness lead­ers,” he added. “They con­tinue to be hope­ful that the threat of a full-blown tar­iff war will soon re­sult in bet­ter trade agree­ments for the United States. (There’s) a will­ing­ness to let this play out.”

JOHN D. SIM­MONS jsim­[email protected]­lot­teob­server.com

In Union County, Drew Medlin, 34, said the drop in soy­bean prices has led him to side­line equip­ment pur­chases and hir­ing.

JOHN D. SIM­MONS jsim­[email protected]­lot­teob­server.com

Mark Vit­ner, se­nior econ­o­mist for Wells Fargo Se­cu­ri­ties in Char­lotte, said steel pro­duc­ers like Nu­cor will ben­e­fit as prices rise and they are able to win back mar­ket share lost to over­seas pro­duc­ers.

JOHN D. SIM­MONS jsim­[email protected]­lot­teob­server.com

Drew Medlin pi­lots a sprayer Thurs­day as he works a soy­bean field in Union County. A loom­ing trade war where tar­iffs on prod­ucts like steel and soy­beans are rais­ing prices threat­ens to hurt U.S. busi­nesses and farm­ers. Medlin, 34, along with his 64-year-old fa­ther, Everette, farms soy­beans and other crops near Mon­roe.

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