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 is running "a nonprofit" and might have to cut jobs.
And west of Detroit Trump's steel tariffs have raised metals prices in the United States.
Trump frequently boasts that taxes are imposed on imports ̵
Tariffs tend to swell the cost of these companies' materials and leave them at a competitive disadvantage to foreign rivals. by import taxes. And their exports can be taxed when other countries retaliate with their own tariffs. "" Wars are messy, "said Todd Barnum, chief operating officer at Linton Crystal Technologies. “All the troops get hurt.”
Back in December 2017, Trump gave those companies and others a gift when he signed a measure that slashed the corporate tax rate from 35 percent to 21 percent. 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."
The higher costs resulting from Trump's tariffs have yet to inflict much more damage to a still-robust American economy, which is less than international trade than most other countries. Fueled by lower taxes, the economy grew at an impressive 3.4 percent annual rate from the previous quarter. And employers added 2.6 million jobs last year, the most since 2015.
And while many companies are hurting from the president's confrontational trade stance, some are benefiting from it. An aluminum melter in Missouri reopened under new ownership this year, for instance, and credited the aluminum tariffs for reducing foreign competition and bringing 450 jobs to New Madrid County.
But for many businesses, the tariffs are escalating costs, creating hardships and magnifying uncertainty. The Institute for Supply Management's manufacturing index lasted at its lowest point in more than two years partly because of the tariffs. And the Federal Reserve appears to be worried that damage from the trade was undercut the economy.
The potential costs of Trump's tariff campaign became clear early on when Apple warned that trade hostilities with Beijing were hurting its business in China – a key "It's not going to be just Apple," Kevin Hassett, chairman of the White House's Council of Economic Advisers, acknowledged to CNN. Companies with significant sales in China will be watching their earnings downgraded next year until we get to China. ”Trumps tariffs are, in theory, supposed to help U.S. producers by raising the prices of goods their foreign competitors ship from abroad. But tariffs can be backfire. They tend to hurt American companies that buy foreign goods for use as components in U.S.-made products.
Many U.S. importers face a wrenching choice: they can pay higher costs to their customers and risk losing business. Or tariffs of course, invite retaliation. The European Union, Canada, Mexico and others have retaliated against U.S. products as payback for Trump's steel and aluminum tariffs. China has tariffs of $ 110 billion in American goods.
Among the products on Beijing's list are American soybeans, and important exports among Trump supporters in the U.S. heartland. To ease the pain, the administration last year handed farmers relief worth $ 11 billion – money that reduces the trade's contribution to the Treasury. Peter Meyer, head of grain and oilseed analytics at S&P Global Platts, said the payments were allowed to pay for their losses from the trade war.
But the damage could prove longer-loading. Before the trade hostilities erupted, China bought 60 percent or U.S. soybean exports. Now, it's turning to Brazil and other countries for soybeans.
"It takes you months to years to cultivate a client and only weeks to piss them off," Meyer said. "The concern now is that we've been off the Chinese and they're going to go away."
Linton Crystal Technologies is currently being paid 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 are back to Rochester for sale with Trump's tariffs at the U.S. border
The U.S. import tax on $ 2 million furnace amounts to $ 500,000. So, in desperation, the company has decided to move to China to avoid the tariffs. And it plans to lay off four or five American workers.
"It just doesn't make sense to me to ship it back here so I can penalized half a million dollars," Barnum said.
In the Linton's business is meantime, the higher costs are hurting. It expects revenue to drop 25 percent in 2019.
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 it 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 hoping for hope that this thing will go away,” said CEO Sohel Sareshwala. “In just sustaining myself, almost becoming a nonprofit organization.”
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 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 were just a negotiating tactic, for part of pressure Canada and Mexico to embrace a new North American trade pact. But the tariffs remain intact even after Trump signed a revamped regional agreement in November
"My jaw dropped," Aznavorian said. "I thought," You've got to be kidding me. ""
Now, it can tell whether the tariff squeeze is ever going to end. "The uncertainty is horrible," he said.
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