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In York County, reality of tariffs sets in.

Byline: Emily Thurlow

As a family-owned steel distributor, Habot cuts steel plates for machine shops in Northern Maryland and Adams, York and Lancaster counties.

Traditionally, the first three months of the year are especially busy for the nearly 60-year-old business and then the demand starts to dip. But this year, that isn't the case, said Brett Warner, Habot's office manager. In fact, the business has seen an increase in demand, which he says is driven by the global talks on tariffs.

In March, President Donald Trump imposed a 25 percent tariff on imported steel. The U.S. steel industry has suffered for decades because of unfair trade and policies imposed by other countries, according to Trump. The tariffs, he said, would help ensure that U.S. companies are not taken advantage of.

Following the March tariff proposal, the Trump administration offered up exemptions from the 25 percent steel tariffs to U.S. allies, which included the European Union, Canada and Mexico. After a compromise could not be reached, Trump revoked those concessions. As a result, the EU retaliated with tariffs of its own on a number of U.S. goods. The EU tariffs went into effect this week. More tariffs on Chinese imports will go into effect on Friday.

The EU retaliatory tariffs have already started to have an effect on midstate companies. Steel-using manufacturers are seeing product price increases of 50 percent or more and are facing difficulties in obtaining the steel they need, said Paul Nathanson, spokesman for the Washington, D.C.-based Coalition of American Metal Manufacturers and Users.

"The U.S. is becoming an island of high steel price, resulting in customers simply importing the finished part," he said. "So if the president wanted to help manufacturing, this is the exact opposite way of doing it."

The coalition formed in April to ensure that steel and aluminum users had a voice in the tariff debate, Nathanson said.

A constitutional challenge

The American Institute for International Steel and two of its members filed a lawsuit June 27 challenging the constitutionality of the statute under which President Donald Trump imposed a 25 percent tariff on imported steel. The lawsuit is aimed at blocking steel tariffs that are driving up costs for manufacturers and their customers.

"With tariffs there are unintended consequences. People get hurt," said Richard Chriss, president of the American Institute for International Steel.

The institute's members include organizations with an interest in steel prices: railroads and other transportation companies, port authorities, unions, traders and logistics companies.

The institute's members depend on imported steel, but do not pay the tariff increase directly, Chriss said. Their businesses and employees are harmed because the tariff increase slashes the amount of steel imported into the U.S. its intended effect thereby reducing their revenues as the costs of their product and its demand increases. Jobs also depend on how much product their businesses handle.

The lawsuit was filed in the U.S. Court of International Trade in New York City. It seeks a declaration that the law relied on by Trump to impose the steel tariff Section 232 of the Trade Expansion Act of 1962 is unconstitutional. The lawsuit also asks for a court order preventing further enforcement of the 25 percent tariff increase.

The institute and two members SIM-TEX LP of Waller, Texas, a retail pipe wholesaler, and Kurt Orban LLC of Burlingame, California, a steel trading company allege that Section 232 violates the constitutional prohibition against Congress delegating its legislative powers to the president. The section of the act, the lawsuit states, does not give Congress any ability to limit the discretion of the president. As it stands, if the president believes that imports threaten national security, he's allowed to impose unlimited tariffs or create other trade barriers at his own discretion.

Although Habot hasn't had an issue locating or maintaining its material as it needs it, the company did have to increase prices for customers as a result of the tariffs. But even with the increased prices, the demand remains steady.

"We've been putting in long weeks and putting in a lot of overtime and purchasing a lot of material. Because we're just a small family-owned business, it's not really feasible to do a lot of speculation in the market and purchase a bulk quantity of material to try and get prices while they're low," Warner said. "But the nature of those [tariff] talks has been a driver of short-term demand. People are seeing that price increase trend and maybe they're getting to projects sooner and are trying to get it [a sale] in before the prices get worse."

Aside from this past March or April, Habot's pricing has remained stable, he added.

"I can certainly see longer range that we might pay the price for this increase [in sales] we're having," he said, describing the situation as volatile. "We're controlling our pricing based on the pricing of our inventory as it comes in."

Warner is, however, concerned with what will happen in the long-term now that the retaliatory tariffs have officially gone into effect. He isn't alone in those concerns.

The Wisconsin-based Harley-Davidson Inc., which has an assembly plant in York County, said at the end of June it would be shifting some of its production overseas to avoid the retaliatory measures. The measures, Harley estimates, would have an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.

As a considerable engine to the York County economy, it's without question that the cost increase would have an impact, not only on Harley and its customers, but also to the businesses that supplement the work at the York Harley-Davidson plant, said Kevin Schreiber, president and CEO of the York County Economic Alliance.

"The tool and die machine shops or metal fabricators would certainly be at risk if Harley changes their plans locally," he said.

Earlier this year, Harley announced it was looking to hire 400-plus employees at its York operations. It still remains to be seen whether the shifting of operations overseas will have an impact on that hiring.

Harley could not be reached for comment.View the full article from the Central Penn Business Journal at Copyright 2018 BridgeTower Media. All Rights Reserved.

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Author:Thurlow, Emily
Publication:Central Penn Business Journal
Geographic Code:1USA
Date:Jul 13, 2018
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