Proposed tariffs on Canadian steel could backfire on Maine

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Hussey Seating Co. in North Berwick is among several manufacturers in Maine that would be affected by price increases in the cost of steel and aluminum. (Photo courtesy of Hussey Seating Co.)

Maine could be vulnerable if Canada retaliates against President Trump’s surprise tariffs against steel and aluminum imports, and manufacturers here could be placed at a competitive disadvantage from the tariffs themselves, which will raise the prices of those metals.

Trump said he will impose 25 percent tariffs on all foreign-made steel and 10 percent on aluminum in order to regrow those industries in this country. Canada is the largest exporter of both products to the United States, leading to fears of a trade war between the neighboring countries, who are each other’s largest trading partners. He claimed he would sign the measure this week.

The president of one of the largest metals distributors in Maine and New England said that while he supports the president’s desire to impose tariffs on steel from China, doing so on Canadian imports is a terrible mistake that will have significant consequences for New England manufacturers.

“You make the New England manufacturing base less competitive compared to the Southern and Midwestern base, and that has a big impact,” said Sam Blatchford, president of American Steel and Aluminum, a distributor in Auburn, Massachusetts, that is owned by Quebec steel processor Nova Steel and has a distribution facility in South Portland. “Maine is so far away from the closest U.S. mills in Chicago and Ohio that they become at greater disadvantage because of the freight costs, which are enormous for steel.” Canadian mills in Hamilton, Ontario, just north of Buffalo, are considerably closer, he noted.

Blatchford said prices for steel plates, beams, and hot rolled coils — the inputs for his business — have jumped 30 percent to 40 percent since January, as the market anticipated some sort of action by the Trump administration.

Chris Robinson, director of marketing at Hussey Seating Co. in North Berwick, said the tariffs will increase the cost of steel, but will be felt by his firm’s major competitors, all of which are in the U.S. and largely serve the U.S. market.

“Those raw material costs will have an impact, but that’s an impact that will be pretty much the same across the industry, so we won’t be having particular problems because we’re in Maine,” said Robinson, whose company makes metal bleachers and other stadium and event seating. “Ultimately it will be felt by the consumer in some sort of price increase, because we certainly can’t not pass those cost increases on to them.”

BIW, COMPETITORS IN SAME BOAT

Bath Iron Works, the state’s largest consumer of both metals, is required to buy from U.S. sources for its Defense Department work, and costs will definitely increase, said defense analyst Loren Thompson, chief operating officer of the Lexington Institute in Arlington, Virginia, but not in a way that is likely to undermine its business, especially as its competitors to build Naval vessels are also in the same boat.

“A tariff on imports would have the indirect effect of raising the price BIW pays for steel and aluminum, and they use a lot,” Thompson said. “But let’s keep in mind that a 25 percent tariff is not the end of the world; it’s an incremental addition that is not going to break the bank.”

Portsmouth Naval Shipyard, which services nuclear submarines, also would be unlikely to see dramatic impacts, Thompson said. “It’s not likely to impact the workloads or the workflow there,” he said. “The higher price of steel will need to be calculated into how they request their budget and how much work they can do.”

A spokesman for BIW said the company, a subsidiary of General Dynamics, would not be able to comment on the issue Tuesday.

U.S. BREWERS FEAR LOSS OF JOBS

Representatives of other industries and businesses that would be affected by the tariffs — including the Maine Manufacturing Association, Maine International Trade Center, the Boothbay shipbuilder Washburn & Doughty and snowplow maker Fisher Engineering of Rockland — did not respond to interview requests. But the Maine Brewers’ Guild said its members were bracing for additional costs.

“Craft beer is increasingly being sold in aluminum cans, and any increases in costs of aluminum will likely lead to increased materials costs for brewers,” Executive Director Sean Sullivan said in a written statement.

Peter McGreevey, president of the Beer Institute, the industry’s trade organization, has said the tariff would in effect be a tax of $348 million on brewers and importers and cost an estimated 20,291 jobs in the United States. The added cost of a single can, however, would be a penny or less, the institute said.

CANADA WILL SEEK PRESSURE POINTS

Trade experts say their biggest concern is with how Canada might retaliate, as some scenarios could cause major disruptions in Maine. Canada exported $7.2 billion in aluminum and $4.3 billion in steel to the United States last year, so it may look to impose billions of dollars worth in countermeasures, and in ways that exert the most political pressure on the president.

“The Canadian government will retaliate by putting a tariff on American products, and the question for them is which ones to target,” said Stefano Tijerina, a political scientist at the University of Maine who studies Canadian foreign and commercial policy. “They will be interested in poking or lobbying American stakeholders in places like Maine or Massachusetts or Minnesota to pressure people to argue against the policy with the administration.”

As officials in Ottawa consider their response, the political calculus could well draw them toward quotas or tariffs on a product like Maine lobster, which is a tiny part of overall trade but which would trigger outsized pain and political pressure at the local level, said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics in Washington.

“If there’s some industry that would provoke Republican governors, and congressional representatives to say, ‘Hey, what are you doing to us?’ that would be the button Canada would touch,” Hufbauer said. “I’m sure that lobster fishermen in Maine are pretty boisterous folks and would be angry if they lost access to Canadian markets.”

The lobster and timber industries are highly integrated across the Maine-Canada border. In late summer, many Maine lobsters are sent to Canada to be processed into picked meat, frozen tails and other products, which are often imported back into the United States. Atlantic Canada lobster fishermen do not have a similar dependence on U.S. processors, but would presumably suffer if they lost access to U.S. consumers.

POSITIONING FOR NAFTA NEGOTIATIONS

Canadian firms own large stretches of Maine’s working forest and many sawmills, and wood products cross the border in both directions to be processed, which might make the sector a less attractive choice for Ottawa’s retaliation, as it would likely cause disruptions on the Canadian side.

Trump is acting under Section 232 of the 1962 Trade Expansion Act, which gives the president the authority to impose unlimited tariffs if a Commerce Department investigation finds a trade-related national security threat. He ordered just such an investigation last year, and Commerce Secretary Wilbur Ross concluded last month that the imports “threaten to impair our national security.” His department recommended a number of options, but Trump’s solution is more severe than any of them.

The president is under considerable pressure to exempt Canada from the tariffs, and his administration has sent mixed signals on this point. White House trade adviser Peter Navarro said Sunday that there would be no exceptions. “If you exempt Canada, then you have to put big tariffs on everybody else,” he told CNN.

Trump, however, tweeted Monday that Canada and Mexico might be exempted if they did what he wanted in ongoing negotiations over the future of the North American Free Trade Agreement. “Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed,” he wrote, adding that Canada had to treat U.S. farmers “much better” if it wanted that to happen.

“This is more about positioning for NAFTA negotiations than anything right now,” said Blatchford of American Steel and Aluminum. “But we hope these actions aren’t doing a lot of damage between now and the end of the month, when they sit back down to discuss NAFTA.”

Colin Woodard can be contacted at 791-6317 or at:

[email protected]

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