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American manufacturers cope with the loss of EU tariff exemptions

Kai Ryssdal, Phoebe Unterman, and Maria Hollenhorst May 31, 2018
Rail cars loaded with rolled up steel at ThyssenKrupp Schwelgern steel plant on May 30, 2018, in Duisburg, Germany. Michael Gottschalk/Getty Images

American manufacturers cope with the loss of EU tariff exemptions

Kai Ryssdal, Phoebe Unterman, and Maria Hollenhorst May 31, 2018
Rail cars loaded with rolled up steel at ThyssenKrupp Schwelgern steel plant on May 30, 2018, in Duisburg, Germany. Michael Gottschalk/Getty Images

The Trump administration said today it would impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico. Since the global tariffs were announced in March, these allies had temporary exemptions from the tariffs. In anticipation of this day, some companies applied for more permanent exclusions from the Department of Commerce. Two such companies are Max Daetwyler Corp., which makes printer parts called doctor blades, and Gemini Group, which produces many metal and plastic products. Marketplace host Kai Ryssdal talked to representatives from both companies to see how they’re dealing with the sudden imposition of the tariffs. The following are edited transcripts of the two conversations. 

Walter Siegenthaler is executive vice president of Max Daetwyler. His company is based in Switzerland and imports steel from France before sending it to the United States.

Kai Ryssdal: First of all, sir, tell me your reaction to the news today. What is your gut reaction?

Walter Siegenthaler: Well, I kind of expected that it would go this way. Of course, it puts us into some kind of an uncertainty. But we are really focusing on getting our own exclusion and not counting on the exclusion of the EU because I think we have a good case to make, since the steel we are importing does not get manufactured in the U.S., it’s not available. So I think we hopefully get our exclusion approved.

Ryssdal: If you don’t get your exclusion and these tariffs go into effect, as the president announced today, what happens to you and the steel you need to make those doctor blades?

Siegenthaler: Well, our product gets considerably more expensive, and we are going to have a real problem at hand because we have a number of competitors. They produce doctor blades outside of the U.S., and they can import the finished product without the duty on it. So we will be at a disadvantage.

Ryssdal: That’s an important point because what we’re talking about here are tariffs on imported raw materials — steel — not tariffs on imported finished products.

Siegenthaler: That’s correct.

Ryssdal: Your competitors then, I imagine, will undersell you, your profitability will go down. What happens to the people who work at that plant there in North Carolina?

Siegenthaler: Well, if it gets to that point, then we have to really consider does it still make sense to manufacture here? Because we also manufacture in Switzerland, India and China. We could import from there the finished goods, but that’s not our target. Our target is to keep manufacturing here, so we will fight for our exclusion.

Ryssdal: How many jobs are we talking about, sir?

Siegenthaler: Directly affected in production, it’s 16, but if we have to close down that manufacturing, we’ll also have to cut down on overhead, so we’re more looking at about 20 people. 

Tim Poole works for Gemini Group, which makes metal and plastic products in Muscle Shoals, Alabama. Poole says Gemini buys about 15 million pounds of steel each year.

Ryssdal: Tell me what the Gemini Group does, would you, and why you need imported steel.

Tim Poole: Well, the Gemini Group manufactures extrusion dies out of H13 steel.

Ryssdal: Is that good steel, H13 steel?

Poole: Yeah, H13 is a high-quality tool steel.

Ryssdal: OK, and you’ve been getting it from overseas, right?

Poole: The majority of it, yes. We import it from Brazil and the EU.

Ryssdal: All right, so given the news of the day, what what are these tariffs going to mean for you and for this H13 steel that you need?

Poole: Obviously, there’s going to be an increase in price coming to us in our purchasing. You know, it’s going to be an increase that we’ll pass along to the customer, and we’ve already talked to the customer about it. So, yeah, does it does impact us? Yeah, it has some impact, but it’s nothing we can’t work with, I think, for future and then, of course, the future may change.

Ryssdal: Have you explored in your capacity as a purchasing guy sourcing this stuff domestically?

Poole: Absolutely, we have. And we’ve found a few domestic suppliers that we’re working with right now.

Ryssdal: What are those conversations like? I imagine you go cold calling these companies saying, “Hey, do you have H13 steel I can buy?”

Poole: Well, when you’re in the business long enough, you get to know a lot of the domestic steel mills and so forth, and so, yeah, you just start calling them, saying, “Hey, look, you know, what can you guys do? There’s one in particular. They do make the H13 steel that we need. It’s just a matter of pricing at that point, though.

Ryssdal: So now you’re motivated to find a domestic source for your production with these tariffs?

Poole: Right, just simply because if the tariffs are creating such an impact now, the domestic suppliers can be more competitive with their price even though domestic steel is going up substantially.

Ryssdal: What’s your tolerance level for how changeable trade policy is nowadays? I mean, it seems to be going back and forth and back and forth between trade wars on, trade wars off, I don’t know what’s happening, where are the tariffs? How are you dealing with that? It’s like the definition of uncertainty.

Poole: Well, it is the definition of uncertainty. But we look at it — or at least, I look at it — from a standpoint of the long term is that it’s probably the best for our country as a whole. To me, it is time for a change, you know. That’s how we make our country better.

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