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To understand the impact of Trump`s tariffs, look to Ohio

To understand the impact of Trump`s tariffs, look to Ohio

News is brought to you by Mr. Shailesh Karia

Published on 9th March, 2019


New York (CNN Business)Ohio is the type of state that steel tariffs are supposed to help, with a smattering of mills that have struggled for decades against brutal competition from China.

It`s also a state that could be disproportionately hurt by tariffs because a number of Ohio`s manufacturers use imported steel. Some manufacturers became collateral damage because of retaliatory tariffs on goods they export.
With those two opposing forces, the tariffs appear to have been an economic wash for Ohio, according to a new analysis.
Ohio State University professor Ned Hill published a comprehensive report this week on how tariffs have played out in the Buckeye State. The takeaway: Most of the new investments that steel producers have made since the tariffs went into effect probably would have happened anyway, because of the strong economy. For many more companies, tariffs have just meant increased costs, which they`ve mostly been able to pass on to customers. Tariffs have raised prices for consumers across the country.
"The really big issue is the ratio of metal-using jobs to metal producing jobs is just huge," Hill told CNN Business.
That`s why the threat of tariffs on Chinese steel rising from 10% to 25%, which the White House has since backed off on, was so alarming. "If the price goes up and the market starts to shrink, the job impact could be substantial for steel users," Hill said.
Steel employment has not risen appreciably nationwide since last year, when the Trump administration imposed tariffs on steel imports, accusing China and other nations of dumping it on the American market and hurting US manufacturers. China, Europe, and Canada responded with retaliatory tariffs on a large number of goods, from soybeans to medical devices.
Manufacturing companies have seen the price hikes play out in their balance sheets every day.
Jack Schron is the CEO of Jergens, a Cleveland-based producer of fixtures and fasteners, as well as high-end electronics like a screwdriver that costs $7,000. He sources much of his steel locally, and has had to contend with rising costs.
"At this point, the biggest problem is our domestic steel suppliers," Schron says. "They`ve raised their prices 17%. They`ve probably wanted to do that for a long time."
Meanwhile, retaliatory tariffs from China have hit the screwdrivers he exports. Because he can`t get certain specialty steels in the United States, it has become more expensive to import from Europe. "I wished that they had taken into consideration what is the impact on the consumer of the steel," Schron says.
According to a survey of 457 Ohio manufacturers conducted in January by the state`s Manufacturing Extension Partnership, 14 companies were severely harmed by the tariffs for every one that strongly benefited, and 4 companies were moderately harmed for every one that moderately benefited.
In a separate recent survey of 381 manufacturers just in Northeast Ohio by the non-profit Manufacturing Advocacy and Growth Network, 66% of respondents said they had been harmed by tariffs. Out of all government regulations, trade policy was cited as the most concerning.
And on a macro level, according to a study released last weekend by economists affiliated with the London-based Centre for Economic and Policy Research, the tariffs resulted in a $6.9 billion loss in real income for US consumers in the first 11 months of 2018. The study also found a "dramatic" adjustment in supply chains, impacting $165 billion in trade flows that were lost or redirected because of the tariffs.
However, Ohio manufacturers often voice the hope that keeping up the pressure on China will lead to a breakthrough that could ultimately help American companies more broadly.
Peter Broer runs a company called Lumitex, also based just south of Cleveland, which designs and manufacturers high-tech lighting systems for everything from cars to hospitals. Then there are all sorts of components that have become more difficult to sell overseas — like the soft covers on a phototherapy machine that treats infants for jaundice — because of retaliatory duties imposed by China.
For Lumitex`s US-based production, sourcing raw materials domestically would be disruptive, expensive, and time-consuming. As long as tariffs remain where they are, Broer says, he`ll continue to pass the cost on to customers — using a line item charge, to make sure they know why the price just went up.
Nevertheless, Broer thinks Trump was right to impose tariffs on China, while presidents before him let the country`s anti-competitive behavior slide.
"It`s now or never. Because once China`s economy passes us, there`s no bargaining," Broer says. "It hurts, but it hurts them more."

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