Months of anxiety for Wisconsin manufacturers in the midst of trade war
Months of anxiety for Wisconsin manufacturers in the midst of trade war
The trade war between the United States and China It has become a summer of uncertainty and anguish in Wisconsin, where manufacturing has been in decline for a long time and remains a vital part of the state's economy.
At Johnson Level and Tool, in the suburbs of Milwaukee, the Trump administration's push and defense commercial moves with China and other countries have left the company withstanding up to $ 3.7 million in additional costs annually due to higher tariffs on the imports, including some of its levels. They are made in China.
The company has a range of options to try to reduce its higher costs, from the increase in prices at the levels it sells to the big stores to the transfer of part of its manufacturing that is now made in China to another country to avoid the rates.
But as companies across the United States struggle to adapt to the higher prices of import taxes, the options faced by Johnson Level and Tool officials underscore that there are no easy answers, and there is no sure way to avoid paying more for the indispensable imports. As Trump's tariffs on countless US imports. UU Root, some of the largest corporations in the US UU They have warned that higher prices will come.
For many of these companies, a key internal question is whether to absorb the higher costs, at least temporarily, to avoid losing customers, or to increase prices immediately. Johnson Level has chosen to increase the prices of stores that buy their products between 8 and 10 percent to match the higher costs imposed by the rates.
The levels are an essential basic tool for things like square the doors and hanging the images directly. Although Johnson manufactures some of his levels in Mequon, he imports others that are cheaper to manufacture in China because his machine tools cost only a tenth of what they do in the United States, said Paul Buzzell, CFO of the company. Nearly half of the levels sold by the company are imported from China.
Uncertainty about how long the rates will be maintained has made it harder to find a solution, Buzzell said. He said he always assumed that if the US. UU They increased the rates, it would give the companies one or two years to prepare making adjustments with their suppliers.
That was the assumption, he said, when the company "began to invest in our suppliers and relationships in China."
"We have this uncertainty, and almost overnight our business has really changed, so the competitive landscape is different," Buzzell said.
The first tariffs on Chinese steel and aluminum in June did not affect Johnson Level; The company does not import those raw materials. But in July, a second round of tariffs on $ 50 billion in Chinese imports covering hundreds of items, including all laser levels and levels that the company imports, means that they are now paying 25 percent more for those.
Despite its decline over the years, manufacturing still plays a central role in Wisconsin's economy, making the survival of companies like Johnson Level essential for the state.
About 16 percent of Wisconsin's workforce is in manufacturing, second only to Indiana, according to the National Association of Manufacturers. And global trade, whether it involves manufacturing, agriculture or other industries, supports nearly 800,000 jobs in the state, according to the US defense group of the Chamber of Commerce. That's roughly a quarter of the state's total workforce.
In business since 1947, Johnson Level and Tool sells measurement levels and tools to stores across the country, including Home Depot, Menards, Lowe's and Ace Hardware.
Buzzell said some of his clients, whom he declined to name, have already been reluctant to the suggested price increases. A commercial customer who, according to him, represented around $ 2 million in Johnson's annual sales, found another supplier shortly after Johnson raised his prices, Buzzell said.
Margaret Smith, spokeswoman for Home Depot, said the company works "with suppliers to mitigate the impact on customers." She said she could not give more details.
Buzzell said the company, which employs about 100 people, has no plans to reduce personnel. He did not disclose the annual income of Johnson Level, saying that it is only less than $ 50 million. Buzzell said that one of the options with greater probability of success, but also the most expensive, would be for the company to find another country that is not subject to tariffs that can manufacture what it needs. Johnson Level has discussed that possibility, including the manufacture in the United States of what now imports from China, but it would imply a complex and slow process.
"This is a classic example of uncertainty," Buzzell said. "We are questioning, we should treat these rates as a long-term thing that will never go away."
On the other hand, he said, the company must make fundamental decisions even knowing that the Trump administration could rescind its rate increases at any time.
"You really do not know what to do," Buzzell said.
The uncertainty about how long the rates will be maintained is making the decisions of other companies that also import products from China difficult.
"The big question is that nobody knows how long they will be in place, so it's hard to make changes," said Austin Ramirez, CEO of Husco International, in an interview.
Husco, based in Wisconsin, manufactures hydraulic and electromechanical components for automobiles and uses machines and metals from China.
"This is costing us a fortune," Ramirez told US Senator Ron Johnson at a meeting with business leaders in July. Ramírez said that the company was incurring around one million dollars a month more in expenses due to Trump's fees. Husco International generates around 500 million dollars in total revenue, said Ramirez.
Husco International conducts approximately half of its business abroad, with plants in Asia and Europe. The company also has about 100 manufacturing jobs in the United States for exports to other countries, but retaliatory tariffs on US exports mean that those jobs could be moved elsewhere, Ramírez said.
"Those jobs are at risk because I can move them to plants abroad that are not subject to these rates," Ramirez told Johnson.
At Regal Ware, a company that makes cast aluminum cookware, pots and pans, the $ 2 million profit could disappear if rates are maintained this year, said Doug Reigl, vice president of the Wisconsin-based company.
Reigl said the company will consider moving production abroad "or will look for ways to eliminate the costs of operations here in the US." If the rates are maintained.
While layoffs may not be imminent in manufacturing companies, hiring could face a slowdown, said Dr. Joseph Daniels, president of the department of economics at Marquette University.
"I would say that what is at risk is actually the creation of jobs," said Daniels.
That is a concern that Buzzell shares.
"It's not going to close us," he said of the rates. "But what it does, theoretically eliminates the money to invest in long-term projects."
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