Spokane Journal of Business

Tariffs import uncertainties for some Spokane-area manufacturers

Some critics wary measure could hinder U.S. exports

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-—Kevin Blocker
Larry Coulson, CEO of Spokane-based CDA Metals, says he fears that tariffs on imported steel and aluminum will drive up prices for domestic steel buyers, like the company he leads. In general, however, buyers and manufacturers alike are unsure of the tariffs’ consequences.
-—Kevin Blocker
CDA Metals operations in Spokane, shown above, employ a total of about 115 people here.
-—Kevin Blocker

Although images show President Donald Trump surrounded by smiling aluminum and steel workers after signing two proclamations imposing tariffs on imports of aluminum and steel, some Spokane-area buyers and manufacturers of steel and aluminum say they aren’t sure what to make of the decision.

The tariffs include a 25 percent duty on steel and a 10 percent charge on aluminum coming to the U.S. from nearly all other countries-Canada and Mexico being the two exceptions. In national media coverage, White House representatives last week said President Trump is following his pledge to revisit global trade deals.

In the Inland Northwest, however, several business operators and owners in the manufacturing sector are uncertain about the ramification of imposing tariffs.

“We buy lots of aluminum and steel every month, hundreds of thousands of dollars’ worth,” says Mike Marzetta, president of Liberty Lake-based manufacturer Altek Inc. “We don’t know what effects tariffs will have, or if they’ll even touch a company in our position.”

Altek is a tier-two aerospace company, which means it often serves as a supplier of airplane parts to a major manufacturer, such as Boeing Co. The company, which employs roughly 200 people, specializes in contract manufacturing, injection mold tooling, plastic injection molding, machining, custom painting and finishing, and assembly testing. The majority of its customers are in the aerospace, industrial, and medical fields, but aerospace is the fastest growing of the three, he says.

In Spokane Valley, a Kaiser Aluminum Corp. official echoes similar sentiments. Kyle England, Kaiser’s human resource manager, says the company is currently studying Trump’s imposed tariffs to get a better understanding of what they might mean to the industry.

“It’s just too early to tell,” he says. 

Founded in 1946, Kaiser manufactures plate, sheet, and coil products specially tailored for the aerospace and high-strength markets. Kaiser has 12 manufacturing facilities in the U.S. and one in Canada. Kaiser’s Trentwood facility is located at 15000 E. Euclid and employs 900 people, has 60 acres under its roof, and occupies a total of 515 acres of land. Kaiser says it’s the largest flat-rolled aluminum mill in the western U.S.

Grant Forsyth, chief economist at Avista Corp., worked as a tenured faculty member at Eastern Washington University in its economics department, with an expertise in international trade, before joining the power company.

Forsyth says imposing tariffs could backfire.

“Imposing tariffs on steel imports is going to come at the expense of steel users,” he says. 

Over a prolonged period of time, the tariffs have the potential to send domestic aluminum and steel users to the Trump administration in search of relief, he says.

Forsyth says there are other political ramifications that need to be considered in imposing tariffs.

“Other countries have their domestic constituents too. Their politicians have to run for re-election, and if they’re viewed as being weak in the face of the U.S. … then there’s the threat of our exports being hit by tariffs. The Pacific Northwest is very dependent on global trade,” he says.

The tariffs are scheduled to take effect on March 24. Since the tariff announcement, U.S. Steel has said it’s reopening a plant in Illinois, and Century Aluminum said the tariffs could generate 300 new jobs in Kentucky.

Larry Coulson, the CEO of Spokane-based CDA Metals, says he’s had extensive conversations and read volumes of trade publications trying to get a better understanding of the import tariffs.

“Let me say, I’m a free trader, and I’ve never liked the idea of government intervening in the marketplace,” he says.

With that said, however, Coulson predicts U.S. steel and aluminum manufacturers will see revenue gains due to the imposed tariffs.

But he’s concerned there will be countries hit by tariffs that will look to other nations to sell their aluminum and steel to avoid the U.S.-imposed tariffs.

Coulson says American steel manufacturers don’t have the ability to meet all domestic demand for aluminum and steel. He fears prolonged tariffs will drive up the purchase price for domestic steel buyers, like his, who purchase the majority of their aluminum and steel in this country.

“In the long run, these tariffs will adversely affect our customers that export their products, which they manufacture here in the U.S.,” he says.

CDA Metals is a full service metals forming and supply company that carries a wide range of materials and has the ability to process them to customer specifications. It employs 115 workers, most of whom are based at its plant at 3900 E. Broadway. It also operates small retail stores in Coeur d’Alene and Missoula, Mont. Coulson says the company has more than 3,000 customers across the Pacific Northwest.

As for Marzetta, he says he has a host of unanswered questions regarding the tariffs.

This week, Altek’s holding its annual series of strategic planning meetings to review 2017 and project what to expect for the rest of the current year. Marzetta says Trump’s tariffs are a discussion item at this week’s company meetings.

“Will these tariffs make distinctions between stainless steel, which has elements of tin and nickel to prevent rust, or heavy duty industrial steel that’s used in bridges?” Marzetta says.

“And what about wrought iron? My point is that there are multiple families within aluminum and steel and different grades within them,” he says.

“Are those distinctions that are made in the tariffs? Maybe it’s just me, but I haven’t seen anything to suggest that anyone knows,” Marzetta says.

Forsyth says he sees Trump’s motivation in imposing two tariffs as being two-fold.

“Part of it’s political in that he’s merely living up to his campaign promise. But I also see this as part of a way of establishing a negotiation position with certain countries by entering them with tariffs on the table,” Forsyth says.

Prior to World War II, U.S.-imposed tariffs on imports served as a source of revenue while also protecting domestic manufacturers of goods and products while a young American industrial economy gradually matured.

“The implementation of the income tax eliminated the revenue component of tariffs, and after World War II, tariffs centered more on protecting manufacturers,” he says.

Tariffs in the modern era, Forsyth says, are “more targeted” in nature and often used by the country that imposes them to facilitate an opportunity to negotiate with other nations.

“While he didn’t impose formal tariffs, Ronald Reagan imposed quotas on Japanese cars. In limiting access, it gave American automakers room to breathe and become competitive with international car makers,” Forsyth says.

The Reagan administration also imposed trade restrictions on U.S. textile imports to protect the domestic industry. More recently, President George W. Bush imposed steel tariffs in 2002, but lifted them the following year.

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