Worcester Business Journal

8 Worcester Business Journal | July 23, 2018 | wbjournal.com Manufacturers look to avoid layoffs and cuts as Trump's tariffs eat into their bottom line Minimizing CASUALTIES BY ZACHARY COMEAU Worcester Business Journal Staff Writer T he impacts of new federal tariffs against imported goods have been swi and immediate for Central Massachusetts manufactur- ers, who are seeing their raw material costs spike while they remain locked in fixed-price deals for their goods. In early June, President Donald Trump's administration imposed tariffs on imported steel and aluminum from places like Europe, Canada and Mexico. Steel imports were taxed at 25 percent while aluminum was taxed at 10 percent. For businesses in Central Massachusetts using foreign steel and aluminum to make their products, the tariffs force them to either eat the added costs or pass them onto customers. Even if they can switch to a domestic suppli- er, those prices are increasing due to rising demand and a new market price standard set by the tariffs increase. "Tariffs are really going to hurt a lot of people," said Robin LeClaire, presi- dent of Uxbridge gear and mechanical assembly manufacturer Lampin Corp. Locked into contracts Lampin is choosing to not pass on the increased costs, which are averag- ing about 15 percent more than what the company was paying for its metals – primarily from Canada – before the tariffs were implements. e company is largely a job shop. As such, Lampin quotes customers based on the current cost of the material and can't easily increase the quote once the materials go up. "We've already quoted customers," said LeClaire. e costs "have eaten into our profit." Moving forward for future jobs, if materials are going to make up a big part of any particular project, Lampin employees are taking extra steps to accurately quote customers. Avoiding personnel cuts West Boylston vehicle cab manufacturer Curtis Industries has seen its prices on raw mate- rials go up about 50 percent in the past two years not just because of tariffs, but due to domestic steelmakers increasing costs in anticipa- tion of the tariffs, among other reasons. CEO George Psyhojos said ongoing trade disputes with Canada, China and European countries – where Curtis sources much of its material – could be potentially devastating if the situation escalates with more tariffs on raw mate- rials and finished goods. e company is growing, having just moved to a new facility in West Boyl- ston. Personnel or capacity cuts are the last thing Psyhojos and the company want to consider. Rarely will a custom- er be willing to take on the additional charges to spare Curtis from eating into its own profit, Psyhojos said. "We're hoping a lot of the talk of tariffs are a lot of noise and will go away," he said. "If they don't, it will be problematic for us or anyone else that manufactures products and consumes parts and/or materials." Limited domestic supply If the U.S. had enough steelmakers to produce materials comparable to prices overseas, the tariffs would be helpful to the steelmaking industry while minimizing impact on manufacturers producing finished goods. "But, the reality is we don't have the capacity in the U.S. to supply steel," Psyhojos said. According to the U.S. Geological Survey, domestic steel production fell from 86.9 million metric tons in 2013 to 78.5 million metric tons in 2016 be- fore jumping to an estimated 82 million metric tons last year. Using the U.S.G.S.'s 2017 estimates, America ranked fourth in raw steel pro- duction behind China, India and Japan. e U.S. lags further behind in production of crude iron, producing an estimated 23 million metric tons in 2017, well behind China at 730 million metric tons. at dynamic sets up a typical sup- ply-and-demand issue at home. Domes- tic metal makers are raising their prices as they struggle to keep up with demand, delaying projects and pushing out the length of contracts. At Oxford precision machine shop Swissturn, which uses domestic steel, the lead time to purchase the raw material for one project went from six weeks to 21 weeks, said President Ken Mandile said. "at's hard to swallow," Mandile said. Swissturn's prices for raw materials are increasing by as much as 15 per- cent, mainly for aluminum. Further, the company's domestic steel suppliers are struggling to meet demand as companies place large orders to stock up to avoid any unforeseen price hikes. "e fear alone of tariffs has disrupted the market," Mandile said. Losing confidence at uncertainty even helped to bring the Associated Industries of Massachusetts' business confidence index down in June, when it dropped more than five percentage points to 61.3. at number is still considered optimistic and was influenced by other factors, including the planned mini- mum wage increase to $15 per hour Robin LeClaire, president of Lampin Corp. Massachusetts trade partners Canada ..................... $3B Mexico .................... $2.6B China ..................... $2.3B United Kingdom ...... $2.1B Germany ................ $1.8B Hong Kong ............. $1.3B Japan .................... $1.3B Netherlands ........... $1.3B South Korea ........... $1.2B Switzerland ............ $1.1B Source: U.S. Department of Commerce Massachusetts exported $26.7 billion in goods in 2017. These countries imported the most last year. Lampin production worker Dakota Bloodworth pulls steel rods from the company's stock. The company primarily sources its steel from Canada, which has a newly imposed 25-percent tariff.

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