As Trump’s tariffs bite, small US manufacturers begin to tap the brakes

Encouraged by a booming demand for construction equipment, Mike Haberman was planning in early February to hire at least 30 more workers for the manufacturing facility of his Gradall Industries in Ohio.

That plan now is shelved, Haberman said, because the cost of steel used in Gradall’s telescopic excavators and vacuum trucks shot up by one-third following President Donald Trump’s crackdown on steel imports. As steel costs account for 35 percent of his cost of production, he fears rising prices would not only hurt his export sales, but also give an edge to foreign rivals at home.

“At this point, we really need more visibility before we would bring in more workers,” he told Reuters.

When Trump signed a $1.5 trillion package of tax cuts at the end of 2017, supporters predicted businesses would respond this year with a burst of hiring and investment.

But Reuters interviews with more than a dozen small to mid-sized manufacturing executives and recent U.S. economic data reveal Trump’s protectionist trade policy is starting to lead some of them to take a more cautious approach, and forcing them to put new investment and hiring plans on hold.

While these manufacturers lauded the administration’s push to make U.S. businesses globally competitive through measures such as the tax overhaul and a deregulation drive, they complained that the steel and aluminum tariffs along with the escalating trade spat with China were undercutting those benefits.

Trump has proposed a separate 25 percent import tariff on some 1,300 Chinese products to try to force changes in Beijing‘s intellectual property practices. If the tariff comes into effect, they would upend Haberman’s components supplies from China, he said.

The steel and aluminum import tariffs imposed in March were designed to protect the American industries and its workers from global overcapacity and unfair trade practices. Trump justified the measure saying protecting the industries was important to the country’s national security. He argued that the tariffs would re-open closed mills, sustain a skilled workforce, and maintain or increase production.

But the tariffs, which came into effect on March 23, have driven up raw material costs and caused supply delays, rendering the manufacturers’ “Made in the USA” products uncompetitive against their foreign rivals, according to these manufacturing company executives.

Mike Schmitt, president at The Metalworking Group in Ohio, said his metal fabrication company has lost around a thousand hours repricing and renegotiating contracts because it can’t honor the old prices.

The company has delayed plans to spend around $500,000 on equipment this year and bring on new staff to expand.

“It’s going to be 2019 before we buy anything because we don’t have enough confidence to do it. There’s just too much uncertainty out there right now,” Schmitt said.

The Institute for Supply Management (ISM) survey on Tuesday showed how widespread that sentiment is: manufacturers slowed down hiring for a second straight month in April amid complaints that the tariffs have brought business planning to a standstill.

Nicole Sahin, chief executive at recruitment firm Globalization Partners in Boston, says a large multi-national client of hers recently pulled back from an $800 million investment in a U.S.-based energy project after rising steel costs made the investment not viable.

Sahin said all her clients who are exposed to steel prices have put their investment plans on hold because of the business “uncertainty” caused by the tariffs.

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