President Donald Trump famously tweeted in March that trade wars are “easy to win.”
But so far, as the United States and foreign countries take turns imposing tariffs on imports from the other, Lancaster County businesses and consumers are on the losing end.
Some local manufacturers are either paying more for imported materials or paying more for domestic ones, as some domestic producers seize the opportunity to raise prices because imports — their competition — suddenly got more expensive, thanks to tariffs.
Either way, some local manufacturers are being forced to cope with higher costs. They’re watching their profit margins shrink or passing along the higher costs to their customers or trying a bit of both.
The tariffs are driving up the prices of many goods for American consumers, eroding some of the benefit of tax cuts put in place by the Trump administration in December.
“Tax reform encouraged investment. It encouraged consumption. It made us competitive. It helped working-class families,” National Retail Federation President Matt Shay told FOX Business earlier this month. “And tariffs will do the exact opposite.”
Here’s a look at how the trade wars are affecting some of the players — and their customers — in several key industry sectors here.
Consider the local impact of America’s 25 percent tariff on imported steel, which pushed business to domestic steel mills that already were busier due to the growing U.S. economy.
At Mount Joy steel fabricator Greiner Industries, the price it pays for domestic steel is going up. So is the length of time it takes to get an order filled, purchasing agent Greg Saltzman said.
“It’s been a pretty interesting year so far,” he said.
Saltzman remembered ordering steel from a domestic mill in March. Because the mill’s price was climbing, Saltzman quoted Greiner’s customer a price five times.
Not only was the last quote 30 percent higher than the first quote, the steel took four weeks longer than usual to be delivered.
Greiner, which is required by law to use domestic steel on its U.S. bridge jobs, said the price hikes and delivery delays have not caused any customers to cancel orders or switch fabricators.
“It’s across the board. Our competitors are seeing the same price increases,” Saltzman said.
High Steel Structures, a Lancaster-based steel fabricator that likewise gets most of its business from bridge projects, is facing the same challenges, a spokesman indicated.
“In the short term, the broad increase in steel prices does expose us to the risk of higher costs on contracts already in place. In the long run, having a healthy and stable domestic steel industry is certainly beneficial,” he said.
He did not respond to emails requesting specifics on the price increases and on High Steel’s strategy for coping with them.
Ben Kauffman, president and CEO of Gap-based Dutchland, has concerns about price increases for steel, which the company uses to reinforce its precast concrete products for the water and wastewater industries.
Kauffman said steel prices jumped around 20 percent in the beginning of the year after Trump first discussed tariffs.
If steel prices increase again, the company’s steel-reinforced concrete wastewater tanks would be a cheaper option than all-steel tanks made by competitors.
“Steel tanks use more steel than the steel reinforcement we use in concrete,” he said.
However, the long lead time for some of its projects means its pricing could be out of date by the time the project starts.
“If steel prices move up quickly and significantly, contractors and manufacturers will be left holding the bag on the outdated pricing of steel,” he said.
Because of the potential pricing volatility, Kauffman said Dutchland would hedge its prices to keep from losing out if prices jump again, much like steel mills do.
Kauffman said the customer “is paying more while we include a higher price to insure against pricing losses on commodities like steel.”
Travis Eby, president of M.H. Eby, a maker of aluminum trailers and truck bodies, said that while the effect of a 10 percent tariff on imported aluminum remains to be seen, he expects it to be minimal.
The bigger concern, Eby said, is tariffs on agricultural products, because of the pain they could inflict on farmers, a major market for M.H. Eby.
With aluminum, Eby said the U.S. mills that supply M.H. Eby have complained for years about cheap material from Asia making it hard for them to compete.
While tariffs on aluminum could raise prices, Eby said they could also help strengthen the domestic aluminum industry, which could begin offering some products M.H. Eby now needs to buy from mills overseas.
“We want to buy U.S. material and support U.S. workers. And if prices are a bit higher, it will be for my competition as well, so we will be on a level playing field,” Eby said.
“Even if we have to pay more in the long run, I would rather see a competitive and a healthy U.S. market for aluminum,” he said.
Another company that’s closely watching how tariffs affect U.S. farmers is CNH Industrial, which makes farm and construction equipment. Its New Holland division is headquartered here.
“As a company, CNH Industrial is against tariffs and trade wars. Even before tariffs go into effect, they negatively impact commodity prices. Any actions that hurt American farmers also hurt us,” said Leandro Lecheta, chief operating officer of CNH Industrial North America.
A spokeswoman for Arconic (formerly Alcoa) declined to discuss the impact of the aluminum tariff on the Manheim Pike rolling mill and cast-plate facility.
Lumber is another industry where a tariff — in this case, a 21 percent hit on Canadian softwood — isn’t the only factor pushing prices higher. Again, the expanding U.S. economy is contributing too.
The tariff, said Mike Viozzi, general manager of Lezzer Lumber’s Rohrerstown and Manheim building materials centers, is “part of the increased cost, but not nearly the whole story.”
Viozzi, who estimates that lumber prices have risen 40 to 45 percent since October, said he has no way of knowing how much of that upturn is due to the tariff.
He buys lumber from a distributor who gets his supply from several countries.
“We don’t buy geography. We buy commodity products,” he said.
The cost of trucking lumber to his building material centers also is playing a role in the upturn. That cost has doubled in recent months, he said.
The result is pricing that Viozzi describes as “volatile.” He’s found that quoting prices to prospective customers is best done with a nimble approach.
“For at least the last six months, my price has been good for five days. I’ll give you 30 days to take delivery,” he said.
Like the local steel fabricators, Viozzi sees demand for his products being undeterred by the higher prices.
“I can tell you from where I sit, it hasn’t slowed down demand. We’ve never been busier,” he said.
At least some of those increases will be passed through to the end user, such as consumers buying new homes.
The National Association of Home Builders, for instance, estimates that the lumber tariff will increase the price of an average single-family home built in 2018 by $1,360.
Tariffs, strong demand and rising transportation costs have fueled a 9 percent jump in the cost of home-construction materials overall in just the first six months of 2018, said Garman Builders’ Shawn Garman, president of the Building Industry Association of Lancaster County.
Remodelers are feeling the pinch too. Again, the challenge is coping with rapidly climbing prices. Here’s what Keith Petrisek, vice president of the Building Industry Association of Lancaster County, is seeing:
“Projects we are currently working on have contracts from the late winter or early spring and the pricing we used at that time does not reflect the recent material price increases due to tariffs.
“As a result we have no choice but to absorb these cost increases for the short term, which means a loss of profitability,” said Petrisek, of Dutch Quality Inc.
Ultimately, the homeowner or homebuyer can expect to pay for at least some of the increase in the cost of materials, he said.
“It’s very difficult to increase productivity or efficiency to make up for (a nearly) double-digit jump in material costs like we’re experiencing (so far in 2018),” Petrisek said.
Lancaster-based Keystone Custom Homes, which expects to build 340 homes in 12 counties this year, is dealing with the same pricing pressures.
“It’s brutal right now,” said director of marketing Ben Rutt. And tariffs aren’t the only culprit.
The cost of lumber is up 30 to 40 percent. The cost of steel is up 80 percent. Skilled labor is getting more expensive. But competition restrains how much of those higher costs can be passed along.
“It’s not like we can go out and charge whatever we want,” Rutt said. Still, prices of its new homes in Lancaster County are up 3 to 5 percent so far this year, he said.
Depending on the home and the area, that could translate into a $10,000 to $15,000 price increase, Rutt said.
But Keystone is absorbing some of its higher costs, decreasing its profit margin.
Some local farmers are on the opposite side of the trade war, as foreign countries slap tariffs on imports of American food. China, for instance, has imposed tariffs totaling 50 percent on American pork and a 25 percent tariff on American soybeans.
“The unknown is, where are we going to end up? I presume that it’s clear that the goal of all that arguing is to get a better deal for us,” said Leon Ressler, Penn State Extension agronomy educator.
“If we get some better markets and better trade deals, so that our exports of agricultural products improve or increase, that will be a very good thing in the long run.
“For the short-run, we have some disruptions and it’s having some short-term negatives,” Ressler said.