Foreign trade and tariffs have been a hot topic since 2016, when President Donald Trump made them key points in his campaign platform. He vowed to tear up trade agreements that he considered harmful to the United States and take measures to level the playing field.
Rhetoric became reality this year, and measures taken are showing results — not necessarily in a good way.
The U.S. on June 1 levied a 25 percent tariff on steel and 10 percent tariff on aluminum from the European Union, Canada and Mexico. In response, Canada has imposed tariffs on $12.6 billion of U.S. goods, the European Union on more than $3 billion of U.S. goods and Mexico on about $3 billion worth.
The U.S. and China have each imposed $34 billion in tariffs on each other, and Trump is threatening tariffs on all $500 billion of Chinese goods shipped to the U.S. Trump also is threatening tariffs as high as 25 percent on imported cars and auto parts.
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Impacts are being felt.
Duties imposed this year by the Department of Commerce on Canadian imports of uncoated groundwood paper, which includes newsprint used by newspapers, printers and other publishers, have climbed as high as 32 percent.
Newspapers have experienced paper price increases of 20 to 30 percent, and publishers — unable to absorb the costs — have to consider raising prices on readers and advertisers, cutting back on news distribution and reducing their workforce. That means the newspapers, its employees, readers and advertisers all suffer.
Tariffs imposed by China, the European Union, Mexico and Canada on U.S. agricultural products have hit American farmers so hard that the president announced the U.S. government would provide about $12 billion in aid. That’s a huge cost resulting from Trump’s initial actions.
But for residents and elected officials to fully understand the impact U.S. tariffs — and retaliatory tariffs — are having, it’s best to see how a community is affected. Republic readers don’t have to look far for impacts.
More than a year ago, The Brookings Institution’s Metropolitan Policy program ranked Columbus as the U.S. metro area with the most to lose should Trump move forward with promises to rip up trade agreements and impose tariffs on steel and aluminum imported from other countries.
Exports comprise 50.6 percentage of Columbus’ gross domestic product. Cummins, a global power company that plays a big role in driving that number, has noted that 95 percent of the world’s consumers live outside of the U.S.
A survey by the Greater Columbus Economic Development Corp. showed that 33 of 47 manufacturers — or 70 percent — who responded are exporting products at some level, Jason Hester, the organization’s president, said previously.
Additionally, three engineering service companies and two distribution firms also have exports, for a total of 38 firms in Columbus who serve markets outside the United States.
Any trade agreement that reduces demand for goods manufactured in Columbus would be bad for the local economy, Hester has said.
A reduced demand for goods impacts something else: Jobs. No one wants to see jobs lost because of the impact of tariffs, but that is a harsh possibility.
In a company message to employees July 26 explaining his public comments about tariffs and the need for open trade, Cummins Chairman and CEO Tom Linebarger said, “Growth allows us to attract and retain our greatest asset, our worldwide employees.”
Cummins employs 58,600 globally and has more than 8,000 workers in southern Indiana, making it the region’s largest employer.
A smaller local company can’t afford to hire more employees because of the increasing cost of materials. Harold Force, president of Columbus-based Force Construction Co., said in a recent Washington Post story that he has had to scrap workforce expansion plans, and the company lost a huge project because of rising steel prices.
During its second-quarter earnings report Tuesday, Cummins shared the impact it has sustained from the tariffs. President and Chief Operating Officer Rich Freeland said tariffs and increased costs of materials are about a $200 million hit to the company, about half of which is still expected in the second half of the year.
Some are offering little sympathy for the company, considering it posted record quarterly sales ($6.132 billion) and profits ($545 million) in the second quarter. But the idea that “taking one for the team” is what businesses should do doesn’t make sense. By that reasoning, the government would have allowed impacted farmers to continue struggle — and maybe even fail — instead of providing aid to one business segment.
Linebarger has been vocal about his opposition to tariffs and belief that they harm American businesses. He has shared those thoughts with the White House. What he’s doing is what any good business operator should do: Advocate for the best interests of his company. Whether a company is making $6 billion in sales or $6, it’s only right for a business operator to point out actions that produce a negative impact.
Linebarger has said that foreign trade has allowed Cummins to grow and succeed, and losing trade lanes would be disastrous.
Some U.S. manufacturers have stated in recent days that they intend to increase product costs in response to tariffs on aluminum and steel. This is a decision that Cummins is also wrestling with — absorb costs and reduce profits or charge the customer for additional expense. Doing that puts the burden of additional costs on the consumer, which can increase inflation.
Not only is Cummins put in a bind with its global operations being hit in multiple ways, but so is Columbus itself.
Economic development leaders for decades have made trips to Asia and Europe to seek foreign investment. The result is 41 foreign companies in Columbus that combined employ 8,922 workers.
However, Hester and Columbus Mayor Jim Lienhoop canceled their annual economic investment trip to China this year because of the impact of the new U.S. foreign trade policies, including tariffs. Instead, the Columbus trade delegation will spend a week in India, in addition to a few days in Japan.
That’s a sudden break in relationship-building that has led to three Chinese companies setting up shop in the city.
“With the trade war in place and discussions about tariffs, it’s maybe made the environment over there a lot less certain,” Hester said.
Tariffs are proving counterproductive to the best interests of American companies, and that’s especially true for those operating in Columbus.
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