November 18, 2018

Tariffs? Time for a Plan B: ‘Gobble Up Every Bit of Material That I Can’

Several manufacturers, however, said they were skeptical that domestic steel and aluminum makers had the capacity to meet the increased demand any time soon, and worried that prices would continue to rise — and even threaten jobs at their own companies. Mr. Farrer has halted all hiring, leaving about 30 positions unfilled, and has canceled, at least for now, a major capital purchase, two large machine tools.

Mark Vaughn has similarly put a brake on hiring at his metal stamping plant in Nashville. As the year started, he planned to add five or six new machinists in $28-an-hour jobs. His tax bill was going down, he had a fat backlog of orders, and one of his biggest clients, the Swedish appliance manufacturer Electrolux, was planning to invest $250 million to modernize its nearby Springfield plant.

But when the administration dangled the prospect of tariffs, Electrolux announced that it was postponing the upgrade, citing concerns about rising steel prices. “This is a message to the administration,” the company said in a statement.

Vaughn Manufacturing’s backlog has dwindled, and Mr. Vaughn said he would probably have to revise price quotes he promised six months ago. Instead of expanding his work force, which he described as “very highly skilled,” he is thinking of cutting five to 10 jobs out of his 50-person staff.

The first rule in his contingency plan, he said, is to “take care of what you got and not overexpand.”

“We were probably in line for $2 million to $3 million worth of work” making cooktops for Electrolux, he explained. And as for the new tax cuts, he pointed out, “Tariffs are a tax, so they took that advantage right back out of there.”

In Milwaukee, Mr. Carlson of Lakeside Manufacturing said he had contracts to get steel through the summer, but was worried about the fall. All the steel distributors, including his own, want to take care of their biggest customers first, he said. At the same time, the largest companies are hoarding as much steel as they can, making it tougher for smaller businesses to find alternatives.

Before the tariff threats, steel orders took six to eight weeks. Once the announcement was made in March, the wait time grew to eight to 12 weeks. “Now we don’t know when we’re going to get our orders filled,” Mr. Carlson said. “We’re hand-to-mouth.”

Article source: https://www.nytimes.com/2018/07/05/business/economy/trade-war-impact.html?partner=rss&emc=rss

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