How the trade war hits home


Beam Inc. employees are pictured. | Getty Images

Kentucky bourbon, Virginia ham and Florida orange juice and are all expected to be hit with retaliatory tariffs by the European Union, Mexico and Canada. | Luke Sharrett/Getty Images

President Donald Trump has said that trade wars are easy to win.

But winning will involve patience on the part of American consumers, importers, exporters and others. The flip side of the trade war is the squeeze that America’s strongest allies will impose.

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It is not clear how long the escalating tensions will play out. In the meantime, there are also many industries that will suffer collateral damage of higher tariffs that they may absorb by cutting jobs, pinching wages or taking other cost-cutting moves.

Here’s a look at how the new trade war could play out:

Consumers

Consumers could soon be paying higher prices for cars and trucks, electronics, homes and staple goods like canned foods and canned beer. Aluminum has been a lightweight substitute for heavy steel components in manufacturing, and Canada provides 40 percent of the U.S. imports of the metal.

The Alliance of Automobile Manufacturers warned Thursday of a direct correlation between Trump’s tariffs and the sticker prices of cars at dealerships. “Automakers already source the majority of their steel and aluminum from U.S. producers. However, these tariffs will result in an increase in the price of domestically produced steel — threatening the industry’s global competitiveness and raising vehicle costs for our customers,” the trade group said in a statement.

Some may say that the counter-tariffs that U.S. trading partners are imposing won’t be felt by Americans. But the tariffs that Canada is imposing on goods like cheese — and Mexico is imposing on products like pork bellies — could result in a glut in the United States if consumers abroad don’t want to pay more for U.S. imports.

Manufacturers and exporters

The tariffs may be good news for American steel plants and aluminum smelters — who are counting on the tariffs to bring back jobs.

But factories here have to compete with global companies. Higher costs (whether for U.S.-made steel and aluminum or that made abroad) mean that manufacturers like Boeing will have to pay more for raw materials than rivals like Canada’s Bombardier or Europe’s Airbus will. In addition, Canada and the European Union are already working on bringing down tariffs with each other on all sorts of other goods.

Harley-Davidson motorcycles, Florida orange juice, Virginia ham and Washington state apples are all expected to be hit by retaliatory tariffs by the European Union, Mexico and Canada. Those producers could, in turn, make adjustments to lower their expenses, leading to other economic harm here.

U.S. manufacturers also have to contend with potential new rounds of uncertainty, as the White House on Thursday left open the possibility that future negotiations with Canada, Mexico and the European Union could make the administration change or cancel the tariffs.

Farmers and agricultural products

America’s farmers and ranchers, a crucial part of Trump’s political base, often find themselves on the front lines of trade disputes, but stand to gain little from the benefits of the steel and aluminum penalties. One of the U.S. heartland’s biggest cash crops — corn — is on the EU’s retaliation list. Wisconsin produces about half of the U.S. cranberry crop — another product on the EU’s list.

Bourbon whiskey (which Congress has deemed to be a “distinctive product of the United States”) is also on Europe’s target list. And citrus farmers in Florida and California are in no position to absorb trade hits, having seen their crops destroyed by blight and Hurricane Irma.

U.S. Grains Council President and CEO Tom Sleight said that exporters are worried that years of hard-won gains could be lost. “We have spent years building markets in these countries based on a mutual belief that increasing trade benefits all parties,” he said.

Commerce Secretary Wilbur Ross left open the possibility that the U.S. government would aid farmers hurt by retaliation.

“Let’s see what evolves as things goes forward,” he said Thursday. “The president is a great supporter of the farm community, and as you may be aware earlier directed [Agriculture] Secretary [Sonny] Perdue to take whatever measures he could to try to offset any retaliation that might occur on the farm community.”

Global suppliers

Parts and supplies crisscross the globe, especially in automotive manufacturing, but also in hundreds of other industries. If a company has a choice of putting a plant in Detroit, where it may have to pay the tariffs, or over the border in Windsor, Ontario, where it doesn‘t, it may choose the latter.

The Coalition of American Metal Manufacturers and Users is concerned that overseas customers will flee to other sources. “Our members are also reporting concerns over their own exports as their overseas customers shift to non-U.S. suppliers who do not face government restrictions on steel and aluminum,” said Paul Nathanson, a spokesman for the group. “And when a customer removes you from their supply chain, especially for smaller, family-owned businesses, it is tough to bring that work back to the U.S.”



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