Tariffs loom large over some North Shore businesses

SALEM – Some local businesses are already feeling the squeeze from President Trump’s escalating trade fight, but others say the tariffs have so far had no impact.

The biggest impact may affect businesses that sell washing machines or that use sheet metal in other ways.

“I’m all for free trade and making an equitable trade deal for all parties,” said Jason Vining, president and CEO of Salem Metal Inc., a precision sheet metal fabrication company located in Middleton. “But at the same time, what is the ripple effect?”

The Trump administration’s has placed a 25 percent tariff on imported steel and 10 percent on imported aluminum, in an effort to boost American industry, save jobs and punish countries like China for unfair trade practices. The United States also imposed 25 percent tariffs on $34 billion worth of Chinese goods, and is threatening to expand that.

In return, China imposed a round of tariffs on U.S. exports, many of them agricultural products like soybeans and a North Shore staple: lobster.

For Salem Metal, it’s the cost of metal that worries Vining.

The company employs 65 people, including five temporary employees, in a 75,000-square-foot facility on Lonergan Road. Vining has plans to expand into a new facility three times the size, but in the meantime, he’s dealing with tariff-induced price hikes.

“The cost of raw materials has been increasing really exponentially for quite some time now,” he said. “We are seeing the highest cost on aluminum and steel we have seen in a long time.”

Vining said the price of commercial grade aluminum year over year is up 79 percent. It was $1.45 a pound last July and $2.60 a pound this month.

Vining buys based on price from local distributors. A lot of the time, the company buys foreign steel and aluminum.

There are not a lot of domestic steel mills, he said, and many of those are focused on the automotive industry and unable to meet the demand for other businesses.

It is not only the possibility of steel shortages that concerns Vining, it’s the prospect of rising prices for domestic steel as the demand for it increases. If there is a scarcity, he will be forced to pay the premium for overseas steel and aluminum. And he can absorb only so much, he said, before he has to pass the added cost onto customers, who are often looking for price breaks, especially if they increase the size of their orders.

Washing machine tariffs

Tri-City Sales President Rick Cohen said prices for appliances have not increased because they have enough inventory on hand. The appliance store has locations in Salem and Ipswich.

Cohen said the brands most likely affected will be LG and Samsung, both South Korean brands.

Tri-City belongs to a buying group, and large purchases by this group may buffer prices in the short term. He expects to see increases in the next couple of months, however — “more than normal in these particular lines.”

Matthew Bock, a partner with the international trade law firm Middleton & Shrull in Woburn, said in an email that the tariffs “are likely to have a growing impact on North Shore businesses as the latest round of tariffs are fully implemented, particularly because of the most recent indication that the duty rate may be increased to 25 percent.”

Bock said companies that determine they are importing products on the tariff lists must either find an alternative of non-Chinese origin or take steps to have that product excluded from the list.

Bock will be part of an international trade seminar being held by the North Shore Chamber of Commerce on Thursday, Aug. 9, 8 a.m., at the chamber’s office, 5 Cherry Hill Drive, Danvers.

Congressman Seth Moulton, D-Salem, has been outspoken about how retaliatory Chinese tariffs are hurting the fishing industry, including a 25 percent tariff on lobster exported to China.

Moulton recently took to Twitter to urge followers to “eat more lobster” in the face of falling prices due to the tariffs that have hindered lobster exports.

“It’s actually a real problem for our fishermen,” said Moulton, “because the price of lobster has plummeted as a result of Trump’s tariffs.

:We have a real problem with China. China is stealing our business ideas, they are stealing our trade secrets — that’s a problem that we need to address. Having a trade war with them doesn’t help that.”

The steel and aluminum tariffs make no sense, Moulton said.

“For every one job that (Trump) saves in the steel or aluminum industry, it’s going to cost five jobs in all the industries that count on getting steel and aluminum for their products,” he said.

Consumers will pay

Van Pham, an economics professor who teaches international trade at Salem State University, said tariffs serve two purposes, to raise tax money on foreign imports and to give U.S. manufacturers a competitive edge.

“In the end, the U.S. consumers pay higher for it,” she said.

Manufacturers that use steel and aluminum to make cars or washing machines will have higher costs and they will raise prices. This can lead to increased inflation and interest rates.

Salem State Professor Kanishkan Sathasivam said Trump is facing a problem other presidents did not in trying to address unfair trade practices. There is a real problem of China stealing American intellectual property, since U.S. businesses have to give up their intellectual property and technology to do business in China.

But the trade deficit being used as a justification for tariffs is misguided, he said.

“Politically … the view is when we run a trade deficit with some other country, that is malicious and bad and it requires some sort of response,” he explained.

But in fact, he said, a trade deficit means the United States is a rich country able to buy more stuff from another country than that country can buy from us. The United States also has a low savings rate, compared with Asia and countries like Germany, meaning American consumers spend what they make.

Instead of tariffs, he said, the United States can identify practices like dumping steel and file a lawsuit with the World Trade Organization. The United States has been successful in bringing lawsuits there in the past. It is better, he said, for both sides to come to trade agreements that to fight a trade war.

Some locals unaffected

Not every business is feeling the pinch from the trade war, however.

“Nothing’s changed with me,” said Kevin Perry, owner of North Shore Scrap Metal in Gloucester. Prices have dropped for scrap steel over the past month, which is about average for this time of year.

Nate Markham, owner of Markham Lumber in Essex, said the 20-percent tariff on Canadian lumber does not affect him, as he harvests his own lumber locally.

And at Douglass Appliance Center in Danvers, owner Lloyed Douglass Jr. said the tariff on washing machines hasn’t affected his business because the store sells brands by Whirlpool, an American manufacturer.

However, with the steel and aluminum tariffs, Whirlpool said in its earnings report on July 23 that the company faces “a very challenging cost environment.”

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