From boat makers to farmers, US-led tariff war inflicts pain
WASHINGTON (AP) — A Florida boat builder absorbs $4 million in lost business and expects more pain. An Ohio pork producer is losing access to a vital export market and fears the damage will last years. A motorcycle shop near Cologne, Germany, wonders if it even has a future.
A brawl that the United States provoked with its closest trading partners is starting to draw blood. On Friday, the European Union began imposing tariffs on $3.4 billion in American goods — from whiskey and motorcycles to peanuts and cranberries — to retaliate for President Donald Trump's own tariffs on imported steel and aluminum. China, India and Turkey had earlier begun penalizing American products in response to the U.S. tariffs on metals.
"We're bleeding pretty bad right now," said Jim Heimerl, a pork producer in Johnstown, Ohio.
Pork producers like Heimerl are already suffering from plunging prices and reduced income since China's move to impose a 25 percent tariff on American pork in retaliation for Trump's tariffs on imported steel and aluminum.
If the trade rift doesn't worsen, the damage to the overall economy will likely be modest, said Mark Zandi, chief economist at Moody's Analytics. But no one can say that the economic harm will end soon.
On July 6, the United States is set to slap tariffs on $34 billion in Chinese goods to punish Beijing for forcing American companies to hand over technology in exchange for access to China's market and other brass-knuckled attempts to supplant U.S. technological dominance.
Beijing has vowed to retaliate. And Trump has threatened to punch back again with tariffs that could eventually cover $450 billion in Chinese products — representing nearly 90 percent of all goods Beijing exports to the United States.
Escalating tariffs would likely raise prices for consumers, inflate costs for companies that rely on imported parts, rattle markets and paralyze business investment as executives wait to see whether the United States can reach a truce with the trading partners it's fighting with.
Soybeans and motorcycles
A full-fledged trade war, economists at Bank of America Merrill Lynch warn, risks tipping the U.S. economy into recession.
Heimerl, president of the National Pork Producers Council, noted that American hog farmers depend on China's growing market. The price of hog futures has plunged since the tensions with Beijing started flaring in March. On an annual basis, it means a loss to pork producers of $2.2 billion, according to Iowa State University economist Dermot Hayes.
China is "a big player to us," Heimerl said. "They take a lot of products the U.S. doesn't eat — hearts, lungs, intestines, stomachs and heads, some of the products we don't eat here."
He recalls that it took American farmers years to recover after President Jimmy Carter imposed a grain embargo on the Soviet Union in 1980 and cut off a crucial market.
In the next round of tariffs, the Chinese are preparing retaliatory penalties on American soybeans — an economically vital export of Midwestern farmers, who have been a key source of support for Trump.
The Europeans, too, targeted American products with political calculation — bourbon from Kentucky, the home state of Senate Majority Leader Mitch McConnell, and motorcycles, which are made in Wisconsin, represented by House Speaker Paul Ryan.
Yet the pain of the EU's 25 percent motorcycle tariffs is being felt across the Atlantic, too.
Wisconsin-based Harley-Davidson, up against spiraling costs from tariffs, will begin to shift the production of motorcycles headed for Europe from the U.S. to factories overseas.
President Donald Trump has used Harley-Davidson as an example of a U.S. business that is being harmed by trade barriers. Yet Harley has warned consistently against tariffs, saying they would negatively impact sales.
Harley-Davidson Inc. sold almost 40,000 motorcycles in the Europe Union last year, generating revenue second only to the United States, according to the Milwaukee company.
The maker of the iconic American motorcycle said in a regulatory filing Monday that EU tariffs on its motorcycles exported from the U.S. jumped between 6 percent and 31 percent, which translates into an additional, incremental cost of about $2,200 per average motorcycle exported from the U.S. to the EU.
Harley-Davidson will not raise its prices to avert "an immediate and lasting detrimental impact" on sales in Europe, it said. It will instead absorb a significant amount of the cost in the near term. It anticipates the cost for the rest of the year to be approximately $30 million to $45 million.
Harley-Davidson said that shifting targeted production from the U.S. to international facilities could take at least nine to 18 months to be completed.
The company is already struggling with falling sales. In January, it said it would consolidate its Kansas City, Missouri, plant into its York, Pennsylvania, facility. U.S. motorcycle sales peaked at more than 1.1 million in 2005 but then plummeted during the recession.
Also in the EU's crosshairs: America's recreational boating industry. It employs 650,000 people in the United States at manufacturers, marinas and dealers.
Ninety-five percent of the boats sold in the U.S. are American-made. It's no coincidence that the EU slapped U.S. motorboats, sailboats and yachts with 25 percent tariffs, said Nicole Vasilaros of the National Marine Manufacturers Associations. Canada is also readying a 10 percent tariff on boats to begin July 1.
The industry has "become a target for those that are wishing to make a point to this president," Vasilaros said. "It's a real U.S. manufacturing industry. In an era where not a lot is still made here in the U.S., boats are."
The top boat-building states are Florida, Tennessee, North Carolina, Minnesota, Indiana, Arkansas and Wisconsin. In Orlando, Florida, Regal Marine Industries — which makes everything from 19-foot motorboats to 53-foot yachts priced above $1 million — said it's had $4 million worth of orders canceled or delayed. CEO Duane Kuck estimates that the company, which employs 750 in Orlando and Valdosta, Georgia, will lose $13 million in revenue this year from European and Canadian tariffs.
"It's hitting very hard and very quick," Kuck said.