US businesses brace for pain from tariffs
A Florida boat builder absorbs $4 million in lost business and expects more pain. An Ohio pork producer is losing access to a vital export market and fears the damage will last years. A motorcycle shop near Cologne, Germany, wonders if it even has a future.
A brawl that the United States provoked with its closest trading partners is starting to draw blood. On Friday, the European Union began imposing tariffs on $3.4 billion in American goods – from whiskey and motorcycles to peanuts and cranberries – to retaliate for President Donald Trump’s own tariffs on imported steel and aluminum. China, India and Turkey had earlier begun penalizing American products in response to the U.S. tariffs on metals.
“We’re bleeding pretty bad right now,” said Jim Heimerl, a pork producer in Johnstown, Ohio.
Pork producers such as Heimerl are already suffering from plunging prices and reduced income since China’s move to impose a 25 percent tariff on American pork in retaliation for Trump’s tariffs on imported steel and aluminum.
If the trade rift doesn’t worsen, the damage to the overall economy likely will be modest, said Mark Zandi, chief economist at Moody’s Analytics. But no one can say that the economic harm will end soon.
On July 6, the United States is set to slap tariffs on $34 billion in Chinese goods to punish Beijing for forcing American companies to hand over technology in exchange for access to China’s market and other brass-knuckled attempts to supplant U.S. technological dominance.
Beijing has vowed to retaliate. And Trump has threatened to punch back again with tariffs that could eventually cover $450 billion in Chinese products – representing nearly 90 percent of all goods Beijing exports to the United States.
Escalating tariffs likely would raise prices for consumers, inflate costs for companies that rely on imported parts, rattle markets and paralyze business investment as executives wait to see whether the United States can reach a truce with the trading partners it’s fighting with.
A full-fledged trade war, economists at Bank of America Merrill Lynch warn, risks tipping the U.S. economy into recession.
Heimerl, president of the National Pork Producers Council, noted that American hog farmers depend on China’s growing market. The price of hog futures has plunged since the tensions with Beijing started flaring in March. On an annual basis, it means a loss to pork producers of $2.2 billion, according to Iowa State University economist Dermot Hayes.
China is “a big player to us,” Heimerl said. “They take a lot of products the U.S. doesn’t eat – hearts, lungs, intestines, stomachs and heads – some of the products we don’t eat here.”