President Trump's tariffs on imported steel and aluminum have generally benefitted the steel industry, but across Pennsylvania the president's economic policies continue to inflict a negative impact on business. Pictured here, a furnace heats steel at the TMK Ipsco Koppel plant in Koppel.
Enterprise and public advocacy reporter at PennLive.com.
Vonie Long is heading into the holiday season with optimism.
Long, president of one of the United Steelworkers locals in Pennsylvania, is upbeat that his employer, ArcelorMittal, is handing out substantial profit shares.
With orders for steel on the increase and the morale among his union brothers and sisters on the uptick, Long can’t help but be positive about the immediate economic forecast.
“I‘m happy,” said Long, president of the Chester County-based 1165 Local of the United Steelworkers, North America’s largest industrial union.
Still, he can’t shake a growing sense of uncertainty.
At the heart of that unease are the aftershocks of the economic and trade policies of the Trump administration – specifically tariffs on imported steel and aluminum, which the president abruptly rolled out earlier this year. Trump’s tariffs have had no impact on the volume of imported steel, but they have raised the prices on steel across the board – both imported and U.S.-made.
“It’s a very odd time. We believe we’ve benefited,” said Long, whose Coatesville-based shop is one of the only steel mills in the country that produces the military grade alloy used in armor for combat vehicles, warships and submarines. “But I‘m not sure other co-workers in other facilities have benefitted. These are very odd times. Some of us have benefited. For some of us it’s impacted negatively.”
Long’s assessment underlies the current mood across the Pennsylvania manufacturing sector. President Trump’s economic and trade policies have been beneficial for some companies but detrimental for others, especially for those that rely on overseas supply chains.
“It has been very mixed in Pennsylvania,” said Jim Craft, professor of business and a steel industry expert at the University of Pittsburgh. “If I were the CEO of US Steel, I would give it an A-plus. If I were GM or a construction firm, I would give it a D-minus or an F because of the impact it will have on prices. It’s a very mixed situation. It’s not small gradations. You have winners and losers.”
Mandel Ngan / AFP/Getty Images
US President Donald Trump shows his signature on Section 232 Proclamations on Steel and Aluminum Imports in the Oval Office of the White House on March 8, 2018, in Washington, DC. Trump on Thursday declared the American steel and aluminum industries had been “ravaged by aggressive foreign trade practices” as he signed off on contentious trade tariffs. “It’s really an assault on our country,” he continued. “I’ve been talking about this a long time, a lot longer than my political career.”
The tariffs on imported steel and aluminum – at a rate of 25 and 10 percent respectively – have resulted in substantial increased profits and sales for the steel industry at rates not seen in eight or nine years, Craft said. Some steel manufacturers are talking about growing the number of plants; and negotiations with unions have led to attractive labor contracts.
“We’ve seen sizable profit sharing in the last couple of quarters where in recent years we didn’t receive any profit sharing,” Long said.
Many manufacturers have applauded the tariffs – even if they’ve experienced negative repercussions.
“It’s been a great year for us,” said Jackie Kulback, CFO of Gautier Specialty Metals, a rolling and plate mill in Johnstown and a leading producer of hot roller carbon and alloy flats.
“The tariffs presented challenges, but we feel like we are working through them. The hope is that there is some relief from tariffs where it’s appropriate and I stress where it’s appropriate.”
Those challenges underscore complex national and global economic factors – but for certain, they hit close to home.
Pennsylvania’s industrial and manufacturing sectors have already had to adjust to the withdrawal from the Trans-Pacific Partnership and NAFTA. The seemingly aggressive trade policies have further complicated matters. Some manufacturers are being forced to reconsider suppliers; others are facing rising costs or a requisite change of direction.
“That’s really the disruption. Redirecting resources from development to developing a new product,” said Bob Fields, COO of HiberSense, a Pittsburgh-based start-up and HVAC manufacturer. “That’s time, resources, delay and scaling..that was definitely a negative impact but we have to work through it.”
In the wake of the tariffs’ roll-out, Fields has had to shift the focus from growing HiberSense to protecting it.
The company, Fields explained, relies largely on proprietary components to manufacture its residential climate control solution product, but it imports a specific thermostat component from China. The tariffs have had a definite impact on the cost of those components.
“As a start up we should be focusing only on sales not on new product development…….that stunts your growth. Not adding is worse than scaling back when you are beginning,” Fields said.
Across the state, local media outlets this year reported on a common theme – that of manufacturers reeling from the fallout of the tariffs.
“We are paying tariffs on some imported steel, but at the same time, domestic steel prices have increased 50 percent in recent months because of tariffs,” Richard Wright, a spokesman for JLG Industries told the Herald-Mail in July. The company, which has several operations in Franklin County, manufactures so-called access equipment such as industrial lifts.
The company did not return calls for comment from PennLive.
“The increase in steel price has a significant impact on our product cost, makes us less competitive selling U.S. manufactured products globally and puts U.S. jobs at risk,” Wright told the Herald-Mail.
Scott Olson / Getty Images
For scores of companies across Pennsylvania, the retaliatory tariffs from the European Union, Canada and China have increased the cost of doing business. Many have had to reconsider supply chains for metals only available overseas.
Indeed, across the Pennsylvania economic landscape, one consensus emerges: Uncertainty.
“We can definitely feel the impact but the impact of uncertainty is almost more than impact of any one thing,” said Meg Christenson, a spokeswoman for Volvo Construction Equipment, a Shippensburg firm that makes pavers, compactors and other heavy construction equipment.
“Not knowing what can happen next that can be challenging.”
For scores of companies across Pennsylvania, the retaliatory tariffs from the European Union, Canada and China have increased the cost of doing business (along with tough decisions about passing it on to the consumer).
Among them is Bethlehem-based Apollo Metals, a metal coating company that provides and prepares metal used in auto brakes, sporting ammunition and decorative products. The company imports many of its metals from its Europe-based parent company, Tata Steel.
Henrik Adam, chief commercial officer of Tata Steel, said that some of the products that the company exports to Apollo – such as its extra wide strip, its battery quality hot rolled material and certain packaging steels – cannot be made by U.S. steel companies. That applies, he said, to the vast majority of the products that Tata Steel Europe exports to the U.S.
“We are disappointed the U.S. has not permanently exempted the European Union from the measures on steel imports and introduced announced tariffs,” Adam said in an email to PennLive.
Drew Angerer / Getty Images
In the long-range forecast, Harley-Davidson could incur as much as $100 million in added costs as a result of the EU tariffs.
Some companies wasted no time in redrawing plans for the future and perhaps none as stunning as Harley-Davidson.
In the wake of the tariffs, the motorcycle manufacturer announced it would shift some production overseas to avoid EU retaliatory tariffs. The move is certain to impact the company’s plant in York County, which is reported to produce 40 percent of the large motorcycles that are impacted by the EU tariffs.
Harley-Davidson declined to comment for this story. Trump, who famously posed with a pair of large Harley motorcycles at the White House lawn, has publicly chastised the company for planning to relocate some of its production overseas.
In its long-range forecast, Harley-Davidson reportedly expects to incur between an estimated $90 million to $100 million in annual impact as a result of the EU tariffs.
Dozens of manufacturers have applied for exemptions from the tariffs. The majority argue that they can procure specialty parts and metals from overseas suppliers. The tariffs inflict an added financial burden on these manufacturers.
Among them is Pennsylvania Extruded Tube Company, a Clarks Summit-based shop that produces welded and seamless steel pipe and tubes. The company works with 40 different grades and sizes of steel; it buys all of its raw material from Sweden, home of its corporate headquarters.
“The tariffs have been an issue for us,” said Ruth Monahan, president of Pennsylvania Extruded.
Monahan has reached out to her congressional delegates, including Sen. Pat Toomey, who has appealed to Trump for exemptions to the tariffs for dozens of Pennsylvania companies as well as expedition of the exemption process.
Toomey, a Republican and ardent free trader, argues that scores of Pennsylvania companies are being negatively impacted by the tariffs. The majority are still waiting for a decision on their requests from the Department of Commerce.
Listed among the companies singled out by Toomey is NLMK Pennsylvania, a Mercer County-based plant that produces flat rolled steel. Toomey points out that the company has spent over $700,000 a day on the tariffs.
Toomey has been critical of the slow-paced review process and is pushing a GOP-led proposed legislation that would bar the president from using national security concerns to invoke tariffs without congressional approval.
“Clearly, there is a need to reform the current petition process,” Toomey said.
Monahan said she continues to use “any resource” to get resolution on the exemptions.
“I don’t know that they have anything to do with it….but I can’t buy materials here locally,” she said.
The concerns are near-identical among companies that depend on imported aluminum.
Brewers, and keg and can manufacturers, for instance, are contending with rising production costs from the tariffs. Aluminum is the main raw material used to make beer brewing vats, kegs and cans.
“The tariffs on aluminium is probably having the most direct immediate impact on us,” said Trevor Prichett, the CEO of Yards Brewing Co. in Philadelphia. “Although I‘m shaky on where it is all going to land because the markets are affected when you have tariffs looming.”
Pritchett recently opened a new space in the city, and expanded the bottled beer operation to include canned beer. Canning could eventually make up about 10 percent of Yards’ production.
Although most of his cans are made in North America – from imported aluminum – Pritchett assures the increases in cost have not been too dramatic for him. He said he can’t say the same for others in his business. He too contends with uncertainty.
Pritchett said the tariffs hurt everyone in the industry one way or another.
“I‘m not so concerned with the day-to-day,” he said. “I‘m concerned with how it plays out in the long term. I don’t have clear clarity into where we are going to land.”
Broadly speaking, the tariffs will benefit companies that manufacture at the primary metals level. The quandary for Pennsylvania is that these days that’s a short list of companies.
For the vast majority of manufacturers, economic vitality will depend on adaptability.
“Companies better able to adapt may be relatively better off than the competition but as far as the overall health of folks who fabricate with metal, they are generally going to be worse off,” said Tom Jackson, a principal economist with IHS Markit.
The Pennsylvania economy overall is doing relatively well, he said. Hiring, for instance, has picked up in recent months, monthly surveys show.
The problem circles back to uncertainty, Jackson notes.
“How long is this going to last?” he said. “How long are the tariffs going to be in place? If we knew the tariffs were going to be in place 10 years, yeah you could see a big investment in iron steel plants but just that uncertainty about what is going to be the case in six months to a year…these companies make their investment plans on a long-term horizon. It is hard to change what you are doing based on uncertain policies right now.”
Assessing the impact of macro policies on Pennsylvania cannot be done in isolation, said Jackson, who specializes in analyzing the state’s economy. For instance, a number of deregulatory measures and corporate tax cuts have been beneficial for businesses and have been a boost to growth but the tariffs have offset some of the effect.
Across the country, growth and employment have outperformed forecasts, but events like re-opening the NAFTA pact pose risks. The new agreement features relatively minor changes, but the entire deal needs to be ratified by the incoming Congress; failure to do so opens the possibility of a complete pullout from the deal.
Under the worst case scenarios, Jackson said, companies that are denied exemptions from the tariffs could continue to see rising costs and be forced to curtail activity or shut down.
The issue will come down to the number of alternatives at a company’s disposal – in terms of readily shifting supply chains. Most companies can pivot quite readily – as long as they know that factors such as tariffs are going to be in place in the long term.
“I do believe that in the short run a lot of companies can’t get around these tariffs,” Jackson said. “They don’t have any other suppliers for their specific need in any reasonable time frame.”
Christenson said she is taking a wait-and-see attitude at Volvo Construction Equipment; the 900-employee firm requires a lot of steel parts.
“We’re monitoring very closely the impact on the cost of the commodities we use to build our products, which are going to make them more expensive to produce, and to purchase,” she said.
Indeed, many Pennsylvania manufacturers view the tariffs on Canada as the sticking point in how Trump’s economic policies.
Canada is Pennsylvania’s largest trade partner; the state exports more to Canada than any other destination.
“Canada has historically been our biggest trading partner,” said Kulback, of Gautier Specialty Metals. “A lot of goods and services go across the border between Canada and the U.S. The real issue, let’s face it, is China.”
David N. Taylor, President & CEO of the Pennsylvania Manufacturers’ Association, is an ardent defender of the Trump tariffs – but as they apply to China, which has glutted the U.S. market with cheap, subsidized steel.
The sanctions, he said, should have never applied to Canada.
“What I‘m hearing from my people is that they are facing real disruption in their supply chain because they are so integrated with Canadian production,” Taylor said.
He said he had hoped the president would have excluded Canada and Mexico from the tariffs.
“I‘m really alarmed and disappointed that didn’t happen,” Taylor said. “What we should be doing is drawing close with our allies and helping to build consensus to confront predatory Chinese practices. I regret very much that the Trump administration has not taken that approach and instead is trying to duke it out with everyone else.”
It should be noted that the intended target of the tariffs are the raw metal products – not finished goods. Taylor argues that a South Korean company that manufactures a product using subsidized Chinese steel has a cost advantage over a U.S. company facing tariffs on imported raw materials.
Craft, the steel expert at the University of Pittsburgh, gives the trade policies an overall failing grade in Pennsylvania.
“In general, they have had a negative impact on the economy,” he said. “The cost of steel has gone up and that’s going to impact us in terms of higher costs of consumer goods. Cars will go up. Washing machines. What we are seeing now are marginal benefits to some but major costs to the U.S.”
For Vonie Long, the benefits are tempered by the uncertain economic picture and the disparate impact across the steel sector.
He said a substantial number of the members voted for Trump with the hope that he would revive the steel industry. Long said he now thinks some of his union brothers and sisters are being negatively impacted by the presidents’ policies.
“I‘m still really uncertain,” he said. “I don’t really trust him and I don’t like a lot of his policies. I don’t believe a blanket tariff was the way to tackle it. I think he could have been more aggressive on the cheating.”
Kameen Thompson, union president at the Coatesville sister plant in Conshohocken, bemoans the bittersweet economic landscape: His members also received generous profit sharing, and orders are on the uptick.
But he bears in mind the fact that in just the last few months, the Conshohocken plant – which is a finishing plant – has reduced its workforce from 290 employees to 80. The plant has ramped down some operations, necessitating layoffs.
Thompson, president of USW Local 9462, said Trump waited too long to roll out his campaign promise to protect the U.S. steel industry.
“If the tariffs had been put in place a year ahead, we probably would had that operation running,” said Thompson, referencing some of the shuttered operations. “At that time it was too late. It would have saved jobs.”
The plant never reacquired the customers it had to let go during the conflicts in Iraq and Afghanistan, when demand for military grade products were in high demand. Those customers widely turned to cheaper sources of imported steel.
“They went to other businesses and they never came back once the military stopped ordering,” Thompson said. “Of course we want to protect our country..our troops, but at the same time, we lost customers that would have kept us afloat during the slow times.”
Thompson said barring catastrophic military conflicts, he will probably never see the numbers out of his plant seen during the last few conflicts.
For now, numbers are good, and he, like Long and the other union members are pleased with their contract and bonuses.
“The steel steel industry is up now but that can change at any point,” Thompson said.