Business

Trade war could have local casualties

Dave Mayfield programs and operates a computerized torch to cut blocks of steel at Awerkamp Machine Steel Sales in Quincy. President Donald Trump has announced the United States will soon levy steep tariffs on imported aluminum and steel. | H-W Photo/Phil Carlson
By Herald-Whig
Posted: Mar. 8, 2018 8:20 am

QUINCY -- If a trade war breaks out between the United States and other countries, business and farm leaders say some of the losses will be felt in Quincy.

President Donald Trump's announcement last week that he plans to place a 25 percent tariff on steel imports and 10 percent on aluminum has caused market fluctuations and debate among politicians and economists.

"It's not good news," said Mike Plant, general manager at Michelmann Steel in Quincy.

Plant said steel prices already have increased in the past year in anticipation of tariffs or similar moves.

"Round tubing is up 35 to 40 percent from a year ago. Flat plate is up 30 percent," he said.

Michelmann Steel buys 3 million to 4 million pounds of steel a year. Any price increase will fuel inflation, and one of the company's customers already has said he'll wait until the price falls. So far, prices only appear to be headed up.

"Usually, when we quote prices, we say they're good for 30 days. Right now we're telling people the price is good for today only," Plant said.

Farmers also could be hit if trading partners respond with tariffs on U.S. agricultural products, as they have in the past.

Adam Nielsen, director of national legislation and policy for the Illinois Farm Bureau, took a group of farmers to meet lawmakers in Washington, D.C., last week. As the president told of his plans, commodity traders were selling soybeans in anticipation of plunging prices.

"Farm income hasn't been great for a number of years. This just adds more uncertainty to an uncertain climate," Nielsen said.

Trump's tariffs would raise steel and aluminum prices in the U.S. While that would help domestic metal producers, it would be bad for companies that use the metals, and it raised red flags for tool and dye makers, beer distributors, air-conditioner manufacturers and other industries. The American International Automobile Dealers Association warned it would drive prices up "substantially."

Bill Awerkamp of Awerkamp Machine Co. and Steel Sales said the business probably buys a half-million pounds of steel and other metals each year. This week, he filled out a National Federation of Independent Business survey on how the tariffs might affect business.

"It's definitely going to make the price of steel go up," Awerkamp said.

But the higher price won't have any immediate effect on the business because there aren't a lot of options when customers need metal.

"People are still going to be buying steel," Awerkamp said.

But Awerkamp said his gut feeling is that the U.S. and other nations would be better off if they did away with tariffs. In the case of a protracted trade war, the higher steel tariffs could backfire if other countries were to halt shipments of scrap iron that supply U.S. industries.

"There's very little iron ore mining done in the United States anymore. It's almost all done with scrap iron that's coming in from outside the United States," Awerkamp said.

Trump has said trading partners are taking advantage of the United States. He often mentions that China is undercutting U.S. steel prices and using government supports to offer other products at below-market prices.

Exporters say a trade war would not be limited to steel and aluminum.

"It's a risky strategy that could have consequences for Illinois and U.S. agriculture," the Farm Bureau's Nielsen said.

Farm producers are especially concerned about livestock herds that often are shipped across the border between the United States and Canada to feed lots and slaughterhouses.

"As has been said by many people, we raise things together," Nielsen said.

U.S. Sen. Roy Blunt, R-Mo., agrees that sales of soybean, corn and other commodities would probably be among the first casualties in a trade war.

"When there is retaliation in trade, it almost always first goes to commodities because nobody is better at that than we are, and it is our leading export," Blunt said.

"Half of all soybeans are exported, and half of those go to China," said Missouri Farm Bureau President Blake Hurst. "They are a fourth of our market."

White House press secretary Sarah Huckabee Sanders said Trump is protecting vital industries and national interests.

"The president is very confident that if (a trade war) is where we end up, we certainly would win it, but that is not the goal here," Sanders said. "The goal here is to get fair, free and reciprocal trade."

U.S. Rep. Mike Bost, R-Murphysboro, is among the few Republicans in Congress to welcome Trump's talk of tariffs.

"We've seen the harm that unfair and illegal trade practices have done in our steel industry right in Madison County, with the idling of Granite City Works and layoffs at Alton Steel," Bost said.

 

The Associated Press provided information for this story.

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