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How Trump’s tariffs are affecting local manufacturers
Some optimistic long-term benefits may outweigh short-term pain
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Chris Hood operates a CNC laser that cuts patterns from steel Tuesday, Aug. 7, 2018, at Ranger Manufacturing in Gainesville. Tariffs on aluminum and steel have driven metal prices up. - photo by Scott Rogers

While the tariffs the Trump administration placed on foreign aluminum and steel are international in scope, as Tim Evans with the Greater Hall Chamber of Commerce said, “economics is always local.”

Hall County has more than 300 manufacturing and processing businesses that employ about 30 percent of workers in Hall, about three times the state and national average, according to Evans, the chamber’s vice president for economic development.

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Mike McGraw demonstrates Tuesday, Aug. 7, 2018, at his Gainesville machine shop how a box made by his company, Ranger Manufacturing, protects locks from being cut. - photo by Scott Rogers

Mike McGraw, partner at Ranger Manufacturing on Airport Parkway in Gainesville, said the company was already using domestic steel, so while it has not had to find a new source, it has seen about a 25 percent increase in the price of steel over the past few months.

The company, which employs 10 people, works with steel, aluminum and some plastics and does contract manufacturing for other companies. The company’s services include laser cutting, sheet metal fabrication, welding and assembly.

“What’s happened is supply has shortened up and tightened up on domestic steel, so people who were buying Chinese steel are now buying more domestic because of supply and demand,” McGraw said.

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Steel boxes made by Ranger Manufacturing wait to be painted Tuesday, Aug, 7, 2018, at the Gainesville machine shop. Tariffs on aluminum and steel have driven metal prices up. - photo by Scott Rogers

In March, President Donald Trump imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, with exceptions for Canada and Mexico. In a March 8 proclamation, he said the tariffs were necessary to protect domestic steel production facilities and reduce American reliance on imported metal.

“This relief will help our domestic steel industry to revive idled facilities, open closed mills, preserve necessary skills by hiring new steel workers, and maintain or increase production, which will reduce our nation’s need to rely on foreign producers for steel ... this tariff is necessary and appropriate to address the threat that imports of steel articles pose to the national security,” Trump said.

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China is the world’s top producer of steel, producing about half of the world’s 1.69 million tons of steel in 2017, according to the World Steel Association. 

The United States, which produced 81.6 million tons of steel in 2017, ranks fourth in the world, behind China, Japan and India.

Fassil Fanta, an associate professor of economics at Brenau University, said “there’s always a winner and a loser” with tariffs.

Fanta said when local manufacturers and producers are protected by tariffs, they can sell their products at higher prices, hire more workers and have a higher profit margin. 

However, consumers then end up paying a higher price than they were accustomed to for imported goods. Local businesses who were selling imported goods can also be negatively affected when they have to compete with local producers, Fanta said.

Steve Hudgins, founder and CEO of Hudgins Steel Co. on Danbury Lane in Gainesville, said he has noticed a drastic increase in steel prices since the tariffs went into effect. His company was already exclusively using domestic steel; it fabricates reinforcement steel for commercial developments, and many clients want their projects to use American-made materials. 

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Ranger Manufacturing's Alfredo Arellano shapes pieces of steel Tuesday, Aug. 7, 2018, at the Gainesville machine shop. The company uses steel to make its products, and recent tariffs on aluminum and steel have driven costs up. - photo by Scott Rogers
However, like Ranger Manufacturing, it is seeing the residual effects as demand for domestic steel goes up and forcing it to increase prices.

“We still had bids out at a cheaper price, and then we had to honor those bids, so that of course is not a welcome thing to happen either, where you’re having to sell it without the profit margin you’re accustomed to,” Hudgins said.

McGraw said his company has evaluated its efficiency and tried to streamline its work to help account for the loss from the tariffs. Manufacturers can also bid more jobs and take on more contracts to compensate, he said.

“Really it’s just updating pricing, making sure you’re getting enough margin to run things, focusing on efficiencies, doing whatever it takes to get things moving in the right direction,” he said.

However, McGraw, who is also the Northeast chapter director for the Georgia Manufacturing Alliance, said the tariffs should be beneficial in the long term, even if manufacturers are forced to adapt their business practices now.

“The outlook, especially for most manufacturers here locally, is it’s a necessary evil to get things back to where they need to be to start bringing more products back to America,” McGraw said. “Without the tariffs, it’s too easy for manufacturers to send products to China. ... Pay your dues now, so the dividends come later.”

U.S. Rep. Doug Collins, R-Gainesville, said he has spoken with business leaders who may understand the intent of the tariffs but are still worried about how the tariffs are affecting their profit margins.

“For many in the business world, there’s an understanding that new approaches need to be taken,” Collins said. “There’s a patience level right now with it, but there’s also very much concern, and there’s concern with some of the pricing that has gone up.”

Fanta said it may seem like tariffs on international goods are disconnected from the operations of local businesses, but the effects of tariffs can be widespread. A bakery, for example, is not involved in metal production, but it might use whipped cream from an aluminum can or pie tins made from aluminum. A tariff on aluminum could affect the bakery’s operating costs, he said.

Mike Giles, president of the Gainesville-based Georgia Poultry Federation, said the poultry industry has not yet dealt with major effects of the most recent trade tensions. China, for example, has banned imports of U.S. poultry since an outbreak of avian flu in 2015, so current tensions with China have not negatively affected the industry. South Africa and India have also recently begun accepting U.S. poultry, opening up a new market for American poultry producers.

Giles said the new tariffs on metal do not seem to be hurting the poultry industry.

Evans, from the Greater Hall Chamber of Commerce, said because Hall’s industrial sector is relatively diverse, the local economy can adjust to a disturbance like a tariff a little easier.

“By diversifying the economy and having so many businesses and industries, we’re insulated from a lot of the worst effects,” Evans said.