Tariffs, trade, and taxes: How businesses are coping

Art Metals Group is a small manufacturing outfit started in 1943 by a German immigrant that makes bearings and other metal parts for cars, trucks, and boats.

It’s the type of business whose owners are usually content to fly under the radar, keep their customers happy, and keep the sales growing. But what might be the biggest threat to the company in its 75-plus-year history has caused its management to do something rare in the world of small manufacturers: speak out.

The Trump administration’s tariffs on imports from China, particularly on steel and aluminum, have hurt business at the factory.

Art Metals — located in Fairfield — exports about 30% of its products to a big auto manufacturer that has plants overseas.

“We have steel prices increasing 20 to 40%, says Marlon Bailey, CEO. “That led to us increasing our prices. As we increased our prices, our customers found another source. We saw a third of our sales to that customer drop.”

The company had to lay off a handful of its workers and has struggled to make up for the lost business, Bailey says.

Bailey joined an ad hoc organization called Tariffs Hurt the Heartland and began speaking up for his company and his industry.

“Pull away the steel and aluminum tariffs,” he pleads.

His efforts and those of other business leaders struggling to deal with the disruptive tactics of tariffs and trade retaliation may be starting to have some impact.

Earlier this month, officials in China announced plans to cut in half the tariffs on roughly $75 billion worth of U.S. goods coming into China. That announcement came after the U.S. said in January that it would lower tariffs on products from China coming into the U.S.

The news provided a bit of optimism that the tit-for-tat trade war started more than a year ago with China and its massive, growing economy might be easing.

But the experiences of businesses affected by the dispute demonstrate how complicated foreign trade can be and how actions meant on the surface to help U.S. business can, in fact, hurt.

Standard Textile is a fourth-generation family-owned business, started by refugees from Nazi Germany, and has grown in the Cincinnati area for about 80 years. Its workers make and sell sheets, towels, and other textiles to hotels and hospitals around the world.

In 2003, the company built a plant in China where unbleached fabric is woven. That fabric is then shipped to its plant in Union, S.C., where it is finished and turned into a soft white material that is then shipped to its plant in Thomaston, Ga., and sewn into sheets.

Standard Textile has been paying tariffs on its own material that it is shipping from its plant in China, says Walter Spiegel, vice president and general counsel for the company.

The company was initially successful in getting those tariffs removed, but months later, they were back on, he says.

“The administration simply changed its mind and put the tariffs back into effect,” says Spiegel.

The future of its 100 workers at the South Carolina plant and 300 at the Georgia plant depend on what happens with the tariffs, he explains.

Chris Gibbs is a first-generation farmer who started in Shelby County in 1983 raising soybeans, corn, alfalfa, and beef cattle. Exports to China are critical to his livelihood and to that of others in agriculture, he says.

About half of the soybeans grown in the U.S. are exported and about two-thirds of that is shipped to China, according to Gibbs. At least that was the case until China slapped duties on agricultural products coming from the U.S. in retaliation for the tariffs the U.S. put on products from that country.

“We’ve lost that market now, in a large sense,” he says. “That market was lost because of retaliation from the tariffs that were put on China.”

Although the government has made $28 billion in payments to farmers nationwide to make up for the lost markets, Gibbs says that’s not the long-term answer.

“Farmers historically have had a very good relationship with taxpayers,” he says. “But the consumer blowback from this is significant.”

Gibbs wants Congress to step up and take action. “Do your job and oversee trade,” he says. “That is part of your responsibility as a separate but equal branch of government.”

He’s so passionate about it that he’s taking the plunge himself and is running for Congress as an independent in Ohio’s Fourth District.

George White is president of Up With Paper, a Mason-based company that sells pop-up greeting cards, all of which are made in China. The proposed 25% tariff on shipping the finished cards to the U.S. market has made running his business more difficult.

“The biggest issue for us is the ability to plan for the future,” he says.

White is also president of the Greeting Card Association and testified in June before a Congressional committee.

“The $1.2 million in additional expenses that these tariffs would cost CM Paula (Up With Paper’s parent company) on an annual basis would swing us from a profitable company to a money losing one,” he testified. “This would cause us to further delay office improvements, machinery purchases, and hiring that we are already postponing in light of the uncertainty of this situation.”

White also urged the administration to participate in the World Trade Organization, an international body that was established decades ago to resolve trade disputes. The Trump administration has held up appointments to the WTO, making it impossible for its appeals body to hold a quorum and conduct business.

White recommends that the government stop placing such a heavy hand on international trade. “Let the economy work; let the marketplace work,” he says.

Spiegel of Standard Textile agrees that trade issues with China — and they are significant — should be handled in other ways, not with tariffs that ultimately hurt U.S. businesses and consumers.

“Tariffs are a tax paid by consumers or they are absorbed by businesses, in which case, there’s less money to grow our business,” he says. “It’s a cost; it’s a tax, plain and simple.”

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Read more articles by David Holthaus.

David Holthaus is an award-winning journalist and a Cincinnati native. When not writing or editing, he's likely to be bicycling, hiking, reading, or watching classic movies.