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Ohio lands at No. 7 of states hardest hit by tariffs

By JD Malone and Mark Williams • Updated Jul 25, 2018 at 9:43 AM

Foreign trade touches just about every part of every state.

Missouri ships playing cards to Europe. Colorado sells animal parts to China. Kansas makes hams for Mexico. Arkansas sends greeting cards to Canada.

The tariffs enacted this year by the United States, Canada, European Union, Mexico and China make every state — along with every consumer and business for that matter — a loser in some way. Some states are getting hit harder than others though, according to a report from the U.S. Chamber of Commerce that is urging the Trump administration to back off from imposing tariffs as a way to resolve U.S. complaints about unfair trade.

Thanks to ports such as Seattle, where American goods are loaded onto ships for export, Washington is the biggest loser with $6.2 billion in exports at risk from tariffs. Louisiana, due to geography, is No. 2 with $5.6 billion at risk — almost all of it coming in the form of soybeans transported down the Mississippi River for shipment to China.

Rounding out the top three is California, whose ports handle a large portion of the American-built cars shipped overseas.

This isn't the sort of list that states want to top. Too bad for Ohio, which is seventh out of the 50 states, with $3.3 billion in exports to Canada, China, Mexico and Europe that are affected by the new tariffs. It's about what would be expected in a state that is home to 25 Fortune 500 companies — fifth most in the country — and has a large manufacturing sector.

Ohio ranks first when it comes to tariffs on trade with Canada. Our neighbor to the north has aimed tariffs at an estimated $2.1 billion worth of Ohio goods, from iron and steel products, to soap made by Procter & Gamble to washing machines built by Whirlpool.

Ohio's thumping from Canada is nearly $1 billion more than the next-highest state, New York.

The cost of washers and dryers skyrocketed by nearly 20 percent for the three-month period that ended in June because of the surging cost of aluminum and steel, according to government inflation data released this month. That's the biggest increase in more than 10 years.

Whirlpool, which makes washing machines in Ohio, is feeling the effect from several angles. The steel that Whirlpool buys to make its machines is now more expensive because of tariffs, and in retaliation to U.S. tariffs, Canada targeted washing machines with tariffs. Whirlpool figures tariffs will cost it about $50 million through the rest of this year.

 

Whirlpool’s worse day since 1987

On Tuesday, Whirlpool shares experienced their worst day in more than 30 years, falling 14.5 percent.

"Global steel cost has risen substantially and, particularly in the US, they have reached unexplainable levels," Whirlpool CEO Marc Bitzer told shareholders during a conference call Tuesday, according to CNBC.

Bitzer said he expects "the U.S. industry to recover" in the second half of the year, CNBC reported, but Whirpool still lowered its full year profit forecast from between $14.50 and $15.50 earnings per share to $14.20 and $14.80 earnings per share to $14.20 and $14.80. The rising costs of steel and aluminum were cited as the primary factor.

In January, Whirlpool announced plans to create 200 new jobs at its facility in Clyde, thanks in part to a tariff on washing machine imports.

That month, President Donald Trump announced a tariff on imports of large residential washing machines in response to a pattern of trade violations by companies such as LG and Samsung, which repeatedly exported their washers to the United States at prices that were considered unfair.

Since 2012, U.S. Sens. Sherrod Brown (D-Ohio) and Rob Portman’s (R-Ohio) had teamed up to fight against unfair trade practices that have harmed Whirlpool, including calling for the Trump Administration’s action that took place at the beginning of this year.

“This announcement is a huge victory for Whirlpool’s approximately 10,000 workers in Ohio, particularly the more than 3,000 people who manufacture washing machines at our Clyde facility and the thousands more who depend on that operation for their livelihood,” Whirlpool North America Vice President Aaron Spira said in January. “Whirlpool has a 106-year commitment to American manufacturing, and this trade decision will allow us to invest even more in our plants and in our people. We are extremely grateful to Senator Brown and all the other members of the Ohio delegation who worked so hard to make this happen,” Spira said.

“This is a great day for American workers in Ohio and beyond,” Whirlpool Chairman Jeff M. Fettig said in January. “Today’s announcement sends a strong message that the U.S. government will crack down on companies that violate our trade rules. We thank and congratulate members of the Ohio delegation for making such a strong stand on behalf of the more than 3,000 workers at the Whirlpool facility in Clyde, Ohio, and the thousands more whose livelihoods depend on that plant. We could not have done this without their support. Their hard work will send a strong message to any countries and companies that break our trade laws and the workers throughout Ohio who depend on their staunch support.”

However, during Whirlpool's first-quarter earnings call April 24, Bitzer told shareholders that costs "have risen substantially and, as a result, we're revising our raw material inflation guidance for 2018," CNBC reported.

On Monday, Whirpool again raised its guidance for costs of steel and aluminum in its second-quarter report, while the company again adjusted its expected 2018 profits downward, according to CNBC.

On Tuesday, Bitzer told shareholders that “U.S. steel is 50 percent more expensive than the rest of the world” and Whirlpool’s suppliers also are experiencing financial woes due to paying tariffs.

The 14.5-percent stock plunge represented Whirlpool’s worst day since Oct. 19, 1987.

 

Ohio farmers could receive help

Next on the tariff chopping block are Ohio's farmers.

Tariffs threaten $830 million in exports from Ohio to China, including $620 million in soybeans, according to the chamber. That number might be low. In recent years, the trade in soybeans with China has topped $1 billion, but the number fluctuates.

"Our two core industries are getting slugged by this," said economist Bill LaFayette, owner of local economic-consulting firm Regionomics.

The $3.3 billion in exports listed in the chamber report make up a fraction of Ohio's $650 billion economy and about 6 percent of the state's exports of $50.1 billion in 2017. It's a bump in the road, not a blown tire.

But tell that to Bret Davis, a Delaware County farmer who grows corn and soybeans on more than 3,000 acres. China slapped a 25 percent tariff on U.S. soybeans, effectively cutting American farmers off from the world's largest market, and leading to a cancellation of orders. Soybean prices dropped 20 percent in the past month. Corn has tumbled as well.

"We're looking at a $200,000 loss on beans in just the last month and a half," Davis said. "On corn, we have lost another $200,000."

Even without tariffs, agriculture has been shaky. Farmers have seen a 40 percent drop in revenue in the past five years since commodity prices reached record highs in 2012, according to the U.S. Department of Agriculture. In a report published in June, researchers at Ohio State University projected that tariffs would cut a row-crop farmer's net income by 59 percent.

"We're going to have farmers who will have to exit the industry," said Ben Brown, manager of Ohio State's farm-management program.

When asked what the tariffs on corn and soybeans look like for Ohio's 75,000 farms, Matthew Roberts, a local agriculture economist and principal of Kernmantle Group, summoned an apt pop-culture reference.

"Do you have a picture of a dumpster fire?"

However, on Tuesday, the Trump administration announced it will be offering $12 billion in aid to American farmers hurt by retaliatory measures from China.

Even as Trump tweeted Tuesday that “Tariffs are the greatest!” and boasted that his tough approach to trade was pushing partners like the EU to come to the table, the cost of his tariffs and threats are causing increasing economic pain at home and creating a domestic political problem for the president.

China, Canada and European countries have countered with levies on U.S. goods, focusing on agricultural products from the Farm Belt — the sector that is a pillar of Trump’s support. And so to alleviate the pain to some farmers, Trump’s administration on Tuesday announced a $12 billion plan for aid to those hurt by retaliatory tariffs.

The relief is intended mainly for Midwest soybean producers, as well as producers of sorghum, corn, wheat, cotton, hogs and dairy exports.

 

Ohio steelmakers benefiting

Still, tariffs don't figure to push the state into recession and could help some businesses, such as steelmakers, that have benefited from the rising prices of steel this year. An Indian steel company, for example, has proposed spending up to $500 million and hiring several hundred workers at an old steel plant in the eastern Ohio village of Mingo Junction, in part because of tariffs that are supporting prices.

"For now, people are saying it will cause (economic) headwinds," LaFayette said. "It's still something to be concerned about."

The concern, though, is that this is just the beginning — that tariffs will escalate into a worldwide trade war leading to higher prices for consumers, lost jobs and maybe a global recession. Tariffs are widely believed to have exacerbated the Great Depression.

Right now, the average person pays about $100 a year in tariffs on imported goods, according to a CNBC analysis of international trade data. Impose stiff tariffs on goods from China and Mexico, and that cost could jump to $1,000, assuming higher tariffs are passed along to consumers in the form of higher prices.

"It's not a good thing," LaFayette said. "It's going to raise prices for consumers and raise prices for the important businesses in Ohio."

Inflation has been mostly benign over the past decade. But it hit a 2.9 percent annual rate in June, the highest since 2012, due in part to tariffs.

Some sectors, though, are feeling plenty of pain already — or are about to.

 

Honda buffeted by trade war

Honda is getting buffeted by the trade war like no other company in Ohio.

Its cars and SUVs built in Mexico and Canada — about 25 percent of all Hondas sold in the U.S. — could be hit with tariffs. Billions of dollars of components that Honda buys from around the globe to build Accords, CR-Vs and several Acura models in Ohio, as well as transmissions and engines, could get significantly more expensive due to proposed tariffs. Honda also exports parts and vehicles, which are targets of some retaliatory tariffs.

Honda, whose manufacturing headquarters is based in Marysville, did not give a dollar-figure impact of the tariffs, but the Alliance of Automobile Manufacturers, which represents most major makers, believes the tariffs could raise the price of an average car by $5,800.

Honda employs 31,000 people at its U.S. operations. It has plants in Ohio, Indiana, North Carolina, South Carolina and Alabama. Honda has invested more than $20 billion into its U.S. operations. In a long and detailed statement regarding the tariffs, Rick Schostek, executive vice president at Honda North America, said the biggest impact of the tariffs might be uncertainty.

"The certainty and predictability of free and open markets that have made America an attractive place to do business are becoming unsteady," Schostek said. "We are making investments that often have implications five or 10 years into the future. Businesses covet stability and predictability."

 

EDITOR’S NOTE: Los Angeles Times (TNS) and Norwalk Reflector staff writers contributed to this story.

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©2018 The Columbus Dispatch (Columbus, Ohio)

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