Publisher's note: The author of this post is Julie Havlak, who is an intern for the Carolina Journal, John Hood Publisher.
As cost of raw materials rise, finished goods will get more expensive
The latest shots in the escalating trade war will hit North Carolina manufacturers hard.
North Carolina exports $32.6 billion
in goods, supporting more than 150,000 jobs, and $1.1 billion of state exports are under fire in the trade disputes, a U.S. Chamber of Commerce report
As the United States and its largest trading partners levy ever-increasing tariffs, businesses from house builders to craft brewers face either losing thousands or hiking prices for consumers. Almost all of the U.S. tariffs will attack the parts manufacturers import to make products, a Peterson Institute analysis
Expect to pay an extra buck for a six-pack of craft beer once the tariffs on aluminum inflate the prices of cans, brewers say. More than half of the beer annually produced in the U.S. comes in cans, according to the Beer Institute
Foothills Brewery in Winston-Salem will dodge the tariffs' full effects because they bottle instead of can, but it still will bleed $18,000 from the cost increase in bottle caps, said Foothills president Jamie Bartholomaus.
"Everything in the brewery is made of stainless steel, heavy and durable stuff. So really, everywhere you look, even caps,"
Bartholomaus said. "If you use nine million caps, everything adds up. That's [an] $18,000 increase for us in caps because of the tariffs. That's significant; for a small brewery that is a lot of money."
Craft brewers lack the resources to absorb the costs.
"Brewers make money when they are efficient, and small craft brewers are the opposite of efficient,"
Bartholomaus said. "We employ a lot of people and tell a lot of stories. That makes our industry lovable, but that inefficiency hurts us ... we can't absorb this. We're not making millions of dollars."
Potential home buyers can also thank the tariffs on Canadian lumber for a $9,000 hike in the price of an average single family home, said N.C. Home Builders Association Executive Vice President Michael Carpenter.
"Domestic lumber production has never been able to meet the demand, and so there has to be importation for lumber,"
Carpenter said. "At the end of the day, it has ended up costing homebuilders more money, and it's pricing potential homebuilders out of the market, we believe unfairly."
Builders and domestic foresters have sparred over the importation of Canadian lumber since the 1980s. Foresters have long accused Canada of dumping subsidized, cheaper lumber into the U.S. market.
"We are concerned anytime trade is distorted, and you are not allowed to freely trade when you have dumping accusations on another country,"
says John Hatcher, executive vice president of the N.C. Forestry Association. "There again is a market distortion that the correction might involve some imposition in terms of tariffs."
But even some lumber yards might be feeling stress from the tariffs. Boyd McLaurin, vice president of operations for Canal Wood, has seen four wood yards close in the past 10 days because of the costs of the tariffs.
"The industry as a whole is doing really well, but the export business is taking a back seat,"
McLaurin said. "It's pretty tough right now in the export business. This time last year, things were really booming, but now it's really tightened up."
That shutdowns could be from the tariffs or from various other shifts in the international market, said Hatcher.
As for the other industries in North Carolina, the effects of the tariffs will be mixed.
"The companies that are going to be most impacted are those who rely on components from offshore to manufacture their products onshore,"
Preston Howard, president of the N.C. Manufacturers Alliance, said. "If we impose tariffs on those components, the cost to manufacture those goods in the U.S. goes up. That'll play out in lots of industries. ... I think it will be a mixed bag."
North Carolina's top exported good
is airplanes, and HondaJet factories in North Carolina are facing more duties on its parts and products.
"Businesses covet stability and predictability. We are making investments that often have implications five or 10 years into the future,"
Honda North America Executive Vice President Rick Schostek said in a press release
. "Now, the certainty and predictability of free and open markets that have made America an attractive place to do business are becoming unsteady."
The Trump administration has signaled it could grant manufacturers exemptions to the tariffs.
GE Aviation, which also manufactures in North Carolina, is looking for ways to minimize the impact of the tariffs.
"We remain concerned that these tariffs could make it harder for U.S. manufacturers to compete in the global economy, and will shrink rather than expand U.S. exports,"
a General Electric spokeswoman said. "We will work with the administration to minimize potential impact to our businesses."
The tariffs will place North Carolina steel makers among the winners; Nucor Corp. of Charlotte ranks among the nation's largest steel manufacturers.
"We've been seeing price increases ... but whether that is due to the tariffs or the expanded housing market, I couldn't say,"
said Structural Steel of Carolina Chief Executive Officer Jim Brewer.
Adding to the stress of tariffs is the renegotiation of the North American Free Trade Agreement, and other trade discussions.
Trump and the European Union announced
their intention Wednesday to "work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods,"
as well as to "resolve the steel and aluminum tariff issues and retaliatory tariffs."
But they didn't rescind any tariffs already in place.
"[The feeling] is one of trepidation,"
said John Chaffee, president of the NCEast Alliance President. The alliance is the economic development agency primarily serving the region of the state east of Interstate 95. "It is really had to predict exactly what the outcome will be in terms of how those tariffs will affect the raw materials coming in and the exports going out."