WASHINGTON – Small manufacturers that fashion metal into parts for makers of cars, appliances and other products in the United States fear they could be the hardest hit by new tariffs on aluminum and steel, according to a report from Dow Jones.
Many of the smaller manufacturers at the heart of the American supply chain are firms few outside their industries or communities have ever heard of, they are the so-called metal-benders: fabricators, welders and machine-tooling shops that rely on steel and aluminum as the main or only ingredients for the parts they make to send on to bigger manufacturers.
“I’m worried,” said Dave Arndt, chief executive of Pentaflex Inc. of Springfield, Ohio, whose products include components such as truck axles and exhaust systems.
Steel accounts for 60 percent of his product costs, and customers could leave if he raises prices. “There’s a lot of risk,” Arndt said.
Together though, they outnumber the nation’s metal producers, many of which have supported the new tariffs, and account for a larger chunk of the US manufacturing workforce.
There were 29,288 steel-consuming firms in the US employing more than 900,000 workers as of the second quarter of 2017, according to the latest US Bureau of Labor Statistics data.
That compares with 916 steel producers with a combined workforce of more than 80,000.
The data include steel consumers that make products such as springs, vehicle parts and wire, but not major manufacturers such as auto makers.
Many of these metal-consuming suppliers are also big consumers of aluminum, Dow Jones added.
The aluminum-production industry is even smaller than steel, employing about 60,000 people at some 600 firms.
It isn’t yet clear exactly how companies and workers will be affected by President Donald Trump’s plan for 25 percent tariffs on imported steel and 10 percent tariffs on imported aluminum.
Trump is expected to sign a proclamation as soon as Thursday afternoon outlining his plan, according to a White House official familiar with the planning.
“We’re not trying to blow up the world,” Commerce Secretary Wilbur Ross said on CNBC on Wednesday. “We’re not looking for a trade war.”
Tariff supporters, including some steelmakers and unions, say that US prices have been weighed down by cheap imports, leaving domestic steel companies unable to invest in their mills, and that any higher costs of the metal could be easily absorbed by manufacturers and would likely only result in slight price increases for end users.
Ryan Sweet, an economist at Moody’s Analytics, said the direct effect on the broader economy would likely be small.
Job losses in the magnitude of 190,000 as a result of the tariffs wouldn’t be “insignificant, but it’s just one month of jobs growth,” he said.
Smaller metal-consumer manufacturers further along the supply chain, however, worry new import duties would drive up prices of steel and aluminum and significantly increase their costs.
Without details of what types of metal products, from what countries, would be subject to the duties, it isn’t clear whether any exclusions might help some manufacturers avoid pain.
“Manufacturing does not stop at a steel plant,” said Roy Hardy, president of the Precision Metalforming Association, which represents about 800 US parts-makers. “A lot of people along the way are drilling holes and stamping parts, and bending them, welding, fabricating them.”
Research firm Trade Partnership Worldwide, which produced a study commissioned by metal-consuming trade groups, estimated this week that tariffs would increase employment in the steel and aluminum producing sectors by nearly 33,500 jobs, but cost over 179,300 jobs throughout the rest of the economy.
Tariffs on imported steel could also send the customers of suppliers to competitors overseas that wouldn’t be burdened by the planned trade barriers, according to some executives at metal-consuming companies.
That, they say, could further a longer-term trend that has shifted US manufacturing jobs abroad.
“Our competitors can buy untariffed steel and send the finished product to America,” said Jody Fledderman, president of Batesville Tool & Die Inc., whose plants in Indiana, South Carolina and Mexico make metal stampings of parts for the automotive and appliance industries.
Steel is Batesville’s biggest expense by far, costing the company $60 million a year, more than double the company’s labor costs.
Fledderman said almost all the steel he uses comes from US producers, Dow Jones added in the report.
Some companies may not have much of a choice between US and foreign steel.
Some varieties of steel aren’t easily available in the US, if at all, because of limited demand for them. So some small manufacturers of steel-based parts expect they would have to absorb a 25 percent increase in the cost for the tariff, and likely pass those higher costs to customers.
Allied Machine and Engineering Corp. in Dover, Ohio, buys specialty steel from Europe to make drill bits and other tools for cutting and boring metal.
Vice President Steve Stokey hopes this type of steel will qualify for a tariff exemption.
He said Allied views the lone US supplier of the steel to be unreliable after it went bankrupt several years ago.
Parts suppliers are among the many manufacturing companies that say they can’t plan ahead without more details.
New tariffs would call into question M&B Metal Products Co. Inc.’s plans to upgrade its factory near Birmingham, Ala., which fashions steel wire into clothing hangers sold to dry cleaners and uniform rental firms, according to its president Milton Magnus.
“We’ve survived a lot over the years and we plan on being here, and hopefully it’s growing this plant in Alabama,” he said.