Companies paying for trade wars
Tariffs escalate costs, create hardships, magnify uncertainty
Washington – In Rochester, New York, a maker of furnaces for semiconductor and solar companies is moving its research and development to China to dodge President Donald Trump’s import taxes — a move that threatens a handful of its 26 U.S. jobs.
In California’s San Joaquin Valley, the CEO of a company that makes precision parts for the biomedical and chip making fields jokes bitterly that he’s running “a nonprofit” and might have to cut jobs.
And west of Detroit, a metal stamping company that supplies the auto industry is losing business to foreign rivals because steel tariffs have raised metals prices in the United States.
Trump frequently boasts that the taxes he’s imposed on imports — steel and aluminum and nearly half of all goods from China — have showered the U.S. Treasury with newfound revenue.
Yet tariffs like Trump’s account for barely 1 percent of federal revenue. It’s actually companies like Linton Crystal Technologies in Rochester, Accu-Swiss Inc. in Oakdale, California, and Clips & Clamps Industries in Plymouth, Michigan, that are paying the price for his trade wars.
In December 2017, Trump gave companies a gift when he signed a measure that slashed the corporate tax rate from 35 percent to 21 percent. The next month, though, he started slapping tariffs on imports — beginning with solar panels and dishwashers, before moving on to steel and aluminum and then hitting $250 billion in Chinese goods.
“Thank you for the tax cut,” said Jeff Aznavorian, president of Clips & Clamps. “However, I’m not going to be benefiting because I’m not going to have any profits to pay tax on.” For his company, “tariffs have completely undermined everything good that those tax cuts brought.”
For many businesses, the tariffs are escalating costs, creating hardships and magnifying uncertainty. The Institute for Supply Management’s manufacturing index plunged last month to its lowest point in more than two years partly because of the tariffs.
Many U.S. importers face a wrenching choice: They can pass their higher costs on to their customers and risk losing business. Or they can absorb the extra costs themselves and sacrifice profits.
Linton Crystal Technologies is being walloped by tariffs both coming and going. The components it sends to an assembly plant in Dalian, China, are subject to import taxes when they arrive in China. And the assembled furnaces it ships back to Rochester for sale are hit with Trump’s tariffs at the U.S. border.
The U.S. import tax on a $2 million furnace amounts to $500,000. So, in desperation, the company has decided to move operations to China to avoid the tariffs. And it plans to lay off four or five American workers.
Accu-Swiss, which buys imported stainless steel on the tariff list, is negotiating with customers to split the higher costs. It’s also trying to make its operations leaner. It has, for example, reengineered its California factory so production can continue at night when the lights are off and employees are gone. Still, it, too, expects a 25 percent drop in revenue this year.
“I’m just sustaining myself, almost becoming a nonprofit organization,” CEO Sohel Sareshwala said.
Clips & Clamps, the Michigan auto supplier, buys steel from U.S. producers that don’t have to pay the tariffs. But domestic steel suppliers have been able to sharply raise their prices because Trump’s tariffs have priced out foreign competition.
“I am losing business to competitors outside the United States,” Aznavorian said, “and I am losing it due to raw materials pricing.”
Initially, Sareshwala and Aznavorian say, they assumed that Trump’s metals tariffs were just a negotiating tactic, intended in part to pressure Canada and Mexico to embrace a new North American trade pact. But the tariffs remained intact even after Trump signed a revamped regional agreement in November.
Now, Aznavorian can’t tell whether the tariff squeeze is ever going to end. “The uncertainty is horrible,” he said.