- Illustration by Steve Oliva
Klaus Becker, the president of Nirosteel LLC, a steel-distribution company based in Charlotte, doesn't know how he's going to handle the Trump administration's new tariffs, which go into effect in two weeks.
"Some of our material is on the water right now. What do we do with it?" Becker wonders. "Twenty-five percent is a lot for me. I cannot eat it. In the middle of production, it's a very hard thing to do."
Becker isn't alone. Businesses all over North Carolina are bracing for potential losses after President Trump announced that his administration would apply a blanket tax to all steel and aluminum imports of 25 percent and 10 percent, respectively. (For now, the Trump administration has exempted imports from Mexico and Canada from the tariffs.) Some of North Carolina's largest industries, including aerospace and automotive manufacturing, textiles, and chemical production, rely on steel and aluminum, which means the tariffs could have long-lasting effects on those sectors.
Wayne Cooper, chairman of the North Carolina District Export Council, warns that the tariff percentages might seem marginal on the surface, but they become exponentially more significant as they stream through local markets.
"When you increase [the price] of the raw material, it isn't just that raw material," Cooper says. "It's extrapolated and multiplied every time that raw material gets processed and shipped. Everybody adds a little bit extra on to it."
That's significant when you consider how many North Carolinians are employed in companies that rely directly on steel and aluminum: by MarketWatch estimates, around 173,000 people.
Further complicating matters, allies and adversaries alike have made clear that the tariffs will be met with swift retaliatory action. Even the European Union vowed to place heftier taxes on everything from cranberries to bourbon to T-shirts coming out of the U.S. So exporters in North Carolina aren't safe either, since a trade war would almost certainly lead to higher taxes on outbound products. That doesn't bode well for residents of Raleigh, Durham, and Chapel Hill, which generated a combined $5.4 billion in exports in 2015.
Retaliatory tariffs wouldn't only touch wealthy CEOs and one-percenters. There were more than ninety-five hundred small and medium-size goods exporters in North Carolina in 2014, and those businesses account for 88 percent of all of the state's exports, according to the International Trade Administration. That means that working-class families and small-scale entrepreneurs may take the brunt of any retaliation.
One high-profile local industry that is expected to get dinged by the tariffs: craft brewing. In a press release, N.C. Craft Brewers Guild executive director Andrew Lemley explained, "From equipment costs to packaging-material costs, these proposed increases can put a chill on one of the fastest-growing industries in the state."
Aluminum cans are obviously a huge production cost, but nearly every aspect of production, including fermentation tanks, kegs, and draft equipment, would cost more with the tariffs in place. These increased prices might not put a brewery out of business, but they could reduce a brewery's ability to expand. And all of those added costs will likely be passed on to consumers.
Trump's tariffs are anathema to many free-market conservatives, including U.S. Senator Thom Tillis, who posted on his website, "Our response needs to be methodical and surgical so we aren't inadvertently punishing America's allies and sparking retaliatory tariffs that could slow down our economic momentum." The president's decision also prompted his top economic adviser, Gary Cohn, to quit.
While all of this plays out, Becker is trying to figure out how he's going to keep his company afloat.
"I have to gather my thoughts a little bit," he says. "Especially the [shipments] that are on the water are of big concern, and I have to talk to my suppliers and see whether they can stop the production for the time being. I don't know yet how to absorb that."