Tariff Whiplash

Tariffs have been all over the news the past few weeks because of moves by the Trump Administration to impose a series of tariffs on almost all the US’s key trading partners, including Canada, Mexico and China.

The administration is of the opinion that the US has been treated unfairly by those trading partners for decades, to the point where they are calling the current situation an economic emergency (which is convenient, since the authority by which the administration is enacting these tariffs is only supposed to be used in an emergency).

Long-term, the hope is that tariff policy will bolster domestic production, and along the way return good-paying manufacturing jobs to the United States. Other justifications include fighting in inflow of illicit drugs and raising revenues to allow for lower taxes.

It's a complex subject, not just from a policy standpoint, but from the knock-on effects on the international supply chain and every business connected to it. You can read our coverage, as well as reactions from around the industry in our May cover story.

What has made the issue even more difficult to report on is that the news changes from day-to-day. A slew of tariffs were announced on April 2nd, only to be suspended for 90 days on April 9th. Tariffs on China have gone from 10% to 25% to 125% to 145%. Then there are shifting carve-outs and exceptions for lumber, electronics, and (depending on its use) steel and aluminum. I had to re-write the intro for that cover story mentioned above three times before publishing!

Just to make things perfectly clear (because there is still some confusion out there): a tariff is a tax or duty paid by the importer. It makes imported goods more expensive, and the importer either takes the loss or (more likely) passes the cost along to its customers in the form of higher prices. This makes foreign-made goods more expensive, giving a competitive advantage to domestically produced goods.

Which sounds fine—except the United States just doesn’t produce everything it uses. For years Republican administrations (and plenty of Democratic ones) championed Free Trade policies that allowed US manufacturers to shop the world for the cheapest prices on materials, not to mention the cheapest prices for labor. That decline in US-based manufacturing all started when it became cheaper to have goods manufactured by foreign workers and then shipped back here. I don’t see the effects of those decades of policy being undone in a single administration.

Meanwhile, businesses are adjusting to the new reality. In this month's Forum you can read how Viega is in tight conversations with its supply base as it plans its path forward. And in our Book of Giants feature you can read how Rasmussen Mechanical is diversifying its work offering, and helping its customers weather the coming price hikes through service and maintenance programs.

But while everyone does their best to carry on, everyone is also playing wait-and-see. Back in my December editorial—only five short months ago—I talked about how, now the election cycle was over, markets and the businesses that served those markets had the clarity they needed about the future to make their business plans and commit their budgets.

Now, everyone is holding their breath. Maybe this is all about gaining leverage to strike some kind of deal, and maybe that final deal will be a good one for everybody. But right now, the only people getting rich are the ones selling antacids and stress balls.