Tar­iff tur­moil ‘cuts legs off’ man­u­fac­tur­ers

Michi­ga­ni­ans among busi­ness lead­ers push­ing back at D.C. hear­ings

The Detroit News - - FRONT PAGE - BY KEITH LAING The Detroit News

Wash­ing­ton — Chris Tem­ple runs the U.S. di­vi­sion of a Ger­man com­pany that makes heavy-duty cases for cam­eras, hand­guns and bi­cy­cles. He says Pres­i­dent Don­ald Trump’s tar­iff-heavy trade strat­egy is com­pli­cat­ing an al­ready dif­fi­cult trade en­vi­ron­ment for com­pa­nies like his that rely heav­ily on on­line sales.

Tem­ple is di­rec­tor of B&W North Amer­ica in Livo­nia, which cus­tom­izes the foam in­serts of polypropy­lene cases that are en­gi­neered and man­u­fac­tured in China for U.S. cus­tomers who want spe­cific in­serts for frag­ile equip­ment, like drones and mi­cro­phones. Polypropy­lene is on the lat­est list of $300 bil­lion worth of Chi­nese goods that could be sub­ject to 25% tar­iffs as the trade war es­ca­lates be­tween the two coun­tries.

Many busi­nesses and trade groups are push­ing back against pro­posed im­port du­ties in hear­ings in Wash­ing­ton this week.

Tem­ple said he was al­ready fac­ing stiff com­pe­ti­tion from in­ter­na­tional com­pa­nies who took ad­van­tage of a 2016 in­crease — from $200 to $800 — in the amount of mer­chan­dise that can be im­ported tar­iff-free by in­di­vid­u­als. That made it more prof­itable for over­seas sell­ers on Ama­zon and other sites to ship cases to U.S. cus­tomers.

“With ship­ping com­pa­nies like DHL, it costs less to ship from the (United King­dom) than it costs me to ship from Detroit to Mi­ami,” he said, not­ing that Trump’s pro­posed tar­iffs will make a bad sit­u­a­tion worse.

The ear­lier change in im­port rules put his com­pany at a 10% price dis­ad­van­tage. “We were able to ab­sorb that dur­ing the manufactur­ing process,” he said. “But when it goes to 25%, we’re at a dis­ad­van­tage. It ef­fec­tively cuts my legs off with on­line cus­tomers.”

Tem­ple is one of sev­eral busi­ness own­ers speak­ing out as the U.S. Trade Rep­re­sen­ta­tive’s of­fice be­gins a week-long pub­lic hear­ing on the lat­est pro­posed Chi­nese tar­iffs. The trade of­fice re­ceived 2,012 writ­ten com­ments ahead of the hear­ings, which started Mon­day and con­tinue through June 25.

Ac­knowl­edg­ing that China is a non­con­ven­tional foe in trade ne­go­ti­a­tions, the Na­tional As­so­ci­a­tion of Man­u­fac­tur­ers said its mem­bers are en­cour­ag­ing the Trump ad­min­is­tra­tion to take “a smart, strate­gic ap­proach that in­cor­po­rates both car­rots and sticks, lev­er­age and di­rect ne­go­ti­a­tion, ex­ist­ing trade en­force­ment tools and new ones crafted to China’s mar­ket­dis­tort­ing be­hav­iors.”

But the group warned against lean­ing too heav­ily on tar­iffs.

“Tar­iffs cause both di­rect harm and sig­nif­i­cant un

cer­tainty for man­u­fac­tur­ers and work­ers here at home, im­pact­ing the United States as much as China,” the group said. “Es­ca­lat­ing tar­iff ac­tions will only com­pound the chal­lenges for man­u­fac­tur­ers and force ir­re­versible de­ci­sions re­lated to jobs, com­mu­ni­ties and in­vest­ment.”

Matthew Shay, pres­i­dent and CEO of the Na­tional Re­tail Fed­er­a­tion, added that the ad­min­is­tra­tion’s lat­est pro­posed list in­cludes cloth­ing, shoes, toys, con­sumer elec­tron­ics, house­hold ap­pli­ances and thou­sands of other prod­ucts. Re­tail­ers will have lit­tle choice but to pass on to con­sumers much of a 25% price in­crease.

“While we agree with the ad­min­is­tra­tion’s goal to change China’s trade prac­tices, we do not be­lieve tar­iffs are the ap­pro­pri­ate ap­proach,” Shay said. “..The cur­rent and pro­posed tar­iffs will only harm U.S. busi­nesses, work­ers and con­sumers.”

Ahead of the hear­ings, a group of 661 busi­nesses signed a let­ter to the pres­i­dent.

“We know first­hand that the ad­di­tional tar­iffs will have a sig­nif­i­cant, negative and long-term im­pact on Amer­i­can busi­nesses, farm­ers, fam­i­lies and the U.S. econ­omy,” the com­pa­nies wrote. “Broadly ap­plied tar­iffs are not an ef­fec­tive tool to change China’s un­fair trade prac­tices.”

Au­tomak­ers are likely to also feel the pinch. The Cen­ter for Au­to­mo­tive Re­search es­ti­mates that 1-3% of the value of U.S.-as­sem­bled ve­hi­cles is com­posed of ve­hi­cle parts im­ported from China that would be sub­ject to du­ties un­der Trump’s pro­pos­als. New tar­iffs would hit the price of af­ter­mar­ket parts much harder.

The un­cer­tain trade en­vi­ron­ment is tak­ing a toll on au­tomak­ers who want con­sis­tency as they seek to plan for the fu­ture, said Char­lie Ch­es­brough, se­nior econ­o­mist and se­nior di­rec­tor of in­dus­try in­sights for Cox Au­to­mo­tive.

“It’s dif­fi­cult to do any kind of long-term plan­ning,” he said. “Be­cause of the un­cer­tainty, man­u­fac­tur­ers are likely go­ing to stick with their ex­ist­ing sup­ply chains.”

Ch­es­brough said the U.S.-China trade re­la­tion­ship is vi­tal to au­tomak­ers, es­pe­cially as the in­dus­try turns to­ward elec­tri­fi­ca­tion and au­ton­o­mous ve­hi­cles.

He said car­mak­ers got a lit­tle re­lief when the pres­i­dent pulled back from re­cent threats to hit all Mex­i­can goods with du­ties that could have es­ca­lated to 25% by Oc­to­ber. But he said the con­tin­u­ing threat of Chi­nese tar­iffs — along with sep­a­rate 25% tar­iffs that could be im­posed on all cars and parts from Eu­rope and Asia due to a claimed na­tional se­cu­rity threat — is still hang­ing over the in­dus­try.

“That’s the ham­mer,” he said. “...We dodged one bul­let, but there’s still more rounds in the cham­ber.”

Daniel Mears / The Detroit News

Chris Tem­ple, di­rec­tor of B&W North Amer­ica in Livo­nia, is one of sev­eral busi­ness own­ers speak­ing out as the U.S. Trade Rep­re­sen­ta­tive’s of­fice be­gins a pub­lic hear­ing on the lat­est pro­posed Chi­nese tar­iffs.

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