Mainebiz

V O L . X X X N O. X X V I I I D E C E M B E R 1 6 , 2 0 2 4 14 M A N U FAC T U R I N G F O C U S e head of another large Maine manufacturer, who declined to be named, is already considering a grimmer scenario: "When you start getting threats of tariffs of anywhere between 10% to 60% on every good coming into this country, it creates another level of uncertainty that's harder to deal with," he says. "We've been contemplating building a new factory here in Maine and this uncertainty is going to cause us to probably slow that down." Brad Williams, a North Berwick-based project manager with Pratt & Whitney, is less rattled about any potential fallout for the aerospace manufacturer, whose clients include the U.S. government. But as a multinational company with parts used by commer- cial airlines around the globe, "I'm sure we'll feel it in that area." "We don't really spend time hedging for things like tariffs, because our budget cycles are fairly pre- dictable," he adds. A sector in flux While the use of tariffs in this country dates back to the colonial era, the most notorious example was the Smoot-Hawley Tariff signed by President Herbert Hoover in 1930 that imposed import taxes on 20,000 imported goods — a move widely seen by economic historians as deepening the Great Depression. Fast forward to Trump's first term in office, when his administration imposed tariffs on China and other parts of the world and on products including solar panels, washing machines, steel and aluminum. Trading partners fought back with taxes on U.S. imports, resulting in higher prices for manufacturers — and consumers. (e Biden administration kept the tariffs on Chinese imports, as well as the U.S.- Mexico-Canada Free Trade Agreement.) If implemented, Trump's new tariffs — targeting countries rather than individual products or industries — could spell similar trouble for American companies, says Amir Mousavian, an associate dean and professor of supply chain management at the University of New England College of Business. "For manufacturers, including those in Maine who rely on raw materials, equipment or compo- nents from these countries, the result will likely be a significant increase in the cost of supplies," hitting smaller businesses the hardest. "is could lead to reduced profitability, layoffs or even closures as these businesses simply cannot keep up with the cost pressures or the competition from larger, more resource-rich businesses," he cautions. Small businesses make up the bulk of Maine's $6.8 billion manufacturing sector, which accounts for 10% of the state's GDP and 63% of its exports. Out of nearly 1,900 manufacturers statewide, fewer than 200 have more than 20 employees. Despite pandemic disruptions, the sector has been on an upswing, adding nearly 3,500 jobs over the last five years, according to a May 2023 report by the state Department of Economic and Community Development. e sector employed close to 57,000 people, around 8% of the state's total, in 2022. At the time, the agency projected the addition of another 1,400 jobs between 2022 and 2027, led by Maine producers of chemicals, pharmaceuticals and medical equipment, transportation and beverages. As new trade wars loom, Mousavian says that one short-term solution for companies is to stock- pile raw materials, finished goods or key compo- nents to create a buffer against immediate disrup- tions though that also ties up capital and incurs additional inventory holding costs. Proactive companies may already have started to hedge their bets by finding alternative suppliers on American soil or in non-tariffed countries, while another strategy is to renegotiate better pricing terms with suppliers in affected countries. Neither is an easy task, especially for businesses that can't quickly reorient their supply chains, he says: "If they had the ability to make swift adjustments, they would likely be less worried about the potential disruptions caused by tariffs." Trouble brews for brewers Tariff-related turbulence goes well beyond Maine, particularly for the nation's 9,900 small and inde- pendent craft brewers. While beer made by members of the national Brewers Association can only be produced in this country, "that doesn't insulate the industry from tariffs," the Boulder, Colo.-based trade group has warned. One potential trouble spot is malted barley, which requires a temperate climate with cool, dry weather in places like Canada. Another is aluminum, which has been subject to a tariff since 2018 although with an exemption for Canada. Even with the exemption, the cost of aluminum cans has risen since the initial tariffs took effect, so a 25% tariff on Canadian aluminum would likely further increase the cost of cans for small producers, the group warned. Other materials used for brewing, like bottle caps imported from Mexico and equipment or parts from other countries, could also be affected by new tariffs. As queries start to come in from concerned members, "we're filling them in with information on where supplies come from so that those who have opportunities to build security now can think about ways to do that," says Bart Watson, the organiza- tion's chief economist. e Maine Brewers' Guild is also watching closely as some of its members fret about higher costs if new tariffs are imposed. "We go through millions of cans a year, so if the price of aluminum went up, that would certainly impact our pricing," says Abe Furth, co-owner of Orono Brewing Co., which employs around 40 people includ- ing 15 in production. e company buys from a domes- tic supplier that gets aluminum from overseas, he says. Because Orono Brewing also has a lot of equipment from Asia, new tariffs "would definitely be a concern if we were building out a brewery right now," he says Baxter Brewing Co. in Lewiston also sees some red flags ahead. "From Baxter's perspective the proposed tariff structure will likely impact the cost of cans again as they did in Trump's last administration," says Jenn Lever, the company's president. Another looming hurdle: "With our malt being primarily Canadian this could also have a huge impact on cost and availability depending on what Canada imposes back to the U.S. as well," Lever says. » C O N T I N U E D F RO M P R E V I O U S PA G E F I L E P H O T O S / C O U R T E S Y O F P U R I TA N M E D I C A L Puritan Medical Products makes swabs for surgical, research and test uses. President and CFO Robert Shultz (inset).

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