Impacts of steel and aluminum tariffs already felt in West Michigan

　　West Michigan businesses are already feeling the impacts of recently implemented steel and aluminum tariffs, which one expert said will be widespread and felt by consumers across the U.S.

　　The Trump administration implemented tariffs on steel and aluminum from Europe, Mexico and Canada late last week and immediately vows of retaliation from leaders of those countries followed.

　　The tariffs, 25 percent on imported steel and 10 percent on aluminum, took effect Friday, June 1.

　　What is a tariff?

　　A tariff is a tax on imports from other countries, said Charles Ballard, a professor of economics at Michigan State University. The idea is to push up the price of foreign goods to make the U.S.-made option more attractive. The tax only applies to steel and aluminum produced outside of the country and shipped to the U.S.

　　The tariff will cause the cost of steel and aluminum products to rise. Then domestic steel and aluminum producers will more than likely respond by raising their prices as well, Ballard said — essentially because they can make more money by still having prices slightly cheaper than the imports.

　　Any U.S. company that makes products with metals or machinery will be impacted by the tariff, Ballard said. This can include automobile manufacturers, producers of nuts and bolts — even breweries, which depend on aluminum cans.

　　Many companies use a mix of steel and aluminum from U.S. and foreign producers.

　　Fears of a trade war

　　Most economists are wary of the implementation of tariffs because it can start a trade war between the U.S. and other countries, Ballard said.

　　“It’s very likely these other countries will respond with tariffs on American products we export,” Ballard said. “The reason most economists, myself included, are scared of this kind of thing is because there is a danger of it getting out of control.”

　　The danger is the U.S. and other countries could continue to add retaliatory tariffs on all kinds of products, Ballard said.

　　The highest tariffs in American history were imposed in 1930, called the Smoot-Hawley Tariffs, and caused a trade war that was a factor in the causation of the Great Depression, Ballard said.

　　“American companies couldn’t export because the tariffs were so high, then those companies had to shrink and lay people off,” Ballard said. “That’s the worst-case scenario for what could happen if a trade war begins.”

　　In response to the tariffs, the European Union threatened to counterpunch by targeting U.S. products, including Kentucky bourbon, blue jeans and motorcycles. David O’Sullivan, the EU’s ambassador in Washington, said the retaliation will probably be announced in late June.

　　Mexico complained the tariffs will “distort international trade” and said it will penalize U.S. imports including pork, apples, grapes, cheeses and flat steel.

　　In Canada, Prime Minister Justin Trudeau said “these tariffs are totally unacceptable.” Canada announced plans to slap tariffs on $12.8 billion worth of U.S. products, ranging from steel to yogurt and toilet paper.

　　In the meantime, Ballard said consumers will start to feel the impacts of the tariffs as the price of products made with steel and aluminum will begin to rise.

　　Jeff Padnos, chairman of waste recycler Padnos in Holland, said his company has already been impacted by the steel and aluminum tariffs.

　　“The whole announcement is introducing uncertainty and volatility into our markets,” Padnos said. “It’s just another element of uncertainty, and we have to deal with that all the time.”

　　Padnos exports products to Mexico, Canada and across the world, which means a potential trade war is a concern.

　　“We don’t know exactly, but we have to be ready for anything,” Padnos said. “As a company, we are committed to free and fair trade. There have been some cases in which the U.S. has been taken advantage of, but it’s hard to believe the tariffs are the best way to solve this issue.”

　　Kent Ensing, vice president of supply management at Zeeland-based Herman Miller, said his company does not import raw steel or aluminum from Canada, Europe or Mexico, but has still felt the impacts of the tariffs.

　　“The impact has been dramatic in that the U.S. domestic mills raised their prices immediately after tariffs were announced back in February,” Ensing said. “The current domestic prices are now equivalent to the imported prices with the tariffs.”

　　The Beer Institute — a trade group that represents beer manufacturers — said the 10 percent aluminum tariff will add on an additional $347.7 million in costs for American brewers and will put more than 20,000 jobs at risk.

　　Potential retaliatory tariffs from other countries placed on West Michigan agriculture exports are a concern as well moving forward, said Jim Byrum, president of the Michigan Agri-Business Association.

　　“We export agriculture products like pork, corn, soybeans and a variety of other products, fruit products like cherries, blueberries, we export those all over the world,” Byrum said. “We are so known and so visible with our agricultural exports, when countries look at retaliation for tariffs they don’t want imposed on them, they look at United States agriculture exports as the area to retaliate.”

　　Mexico and China in particular have threatened significant tariffs on pork products in response to President Trump’s decision, Byrum said.

　　In West Michigan, soybean production is a key to the local agricultural industry. Should retaliatory tariffs be put in place, Byrum said the soybeans might have to be shipped to places other than Mexico, Canada or China.

　　In the agricultural world, a key component in the export world is building relationships and agreeing to long-term contracts, so finding new trading partners may be difficult.

　　“What we are finding is that customers are shying away from long-term commitments and looking more to hand-to-mouth or just-in-time supply for some of the commodities we sell here because there is so much uncertainty in the marketplace,” Byrum said.

　　U.S. Rep. Bill Huizenga, R-Zeeland, said the negative impacts of the steel and aluminum tariffs and a potential trade war will be felt by businesses in West Michigan.

　　“While I understand the administration’s goal of putting America first, I don’t believe this proposal achieves the desired outcome,” Huizenga said. “Steel and aluminum imports from these countries do not pose a security risk to the United States.”

　　Huizenga met with manufacturers from around West Michigan in Grand Haven recently to discuss the tariffs and said the business owners voiced concerns of the rising cost of doing business.

　　The tariffs will impact the operations and growth outlook, Huizenga said. One immediate solution the business community would like to see is the ability to grandfather contracts in so they are not impacted by the new tariffs.

　　“Any perceived short-term gain from these overly broad tariffs may be quickly blunted by hardworking men and women losing their jobs in West Michigan and communities where manufacturing plays a significant role in the local economy,” Huizenga said.

　　Huizenga said he is imploring the Trump administration to reconsider the “misguided proposal” and at a minimum allow for existing contracts to be unaffected.

　　U.S. Rep. Fred Upton, R-St. Joseph, agreed a potential trade war hurts West Michigan.

　　“We need to target tariffs to address specific unfair trading practices in a way that minimizes negative consequences for Michigan jobs, manufacturers, and consumers,” Upton said in an email. “Our allies want certainty and here in Michigan so many of our jobs are based on exports.”

　　Meanwhile, key U.S. Senate Republicans are pushing longshot legislation that would require Congress to sign off on President Trump’s import tariffs.

　　The idea being pursued by Sen. Bob Corker, R-Tenn., and Sen. Pat Toomey, R-Pa., would be narrowly crafted legislation requiring congressional approval of the tariffs Trump has imposed in the name of national security.

　　They’re targeting Trump’s reliance on the so-called 232 authority, named from Section 232 of the Trade Expansion Act of 1962, which allowed the administration to impose the tariffs on some of the U.S.’s top allies. The senators are also hoping to halt Trump’s threat to slap tariffs on auto imports, including those from Japan.

　　Farm-state senators are particularly concerned about retaliatory tariffs that would close off foreign markets to pork and key crops like soybeans and corn. “It isn’t as if the dog has not barked,” said Sen. Pat Roberts, R-Kan., the chairman of the Senate Agriculture Committee.

　　But it’s unclear what lawmakers are willing to do besides bark. Challenging Trump comes with its own risks, from alienating his supporters to taking voters’ attention off a healthy economy before the midterm elections, which will determine control of the House and Senate.

　　Asked if Congress will act on trade, Sen. Roy Blunt, R-Mo., a member of GOP leadership, answered simply: “No.”