By Kurt R. Bauer
The tariff issue reminds me of an old political joke about a congressman who tries to straddle the line on an issue that divides his constituency. “I have friends on this side of the issue, and I have friends on that side of the issue,” he explains. “And I am always with my friends.”
President Trump’s tariffs have put WMC in much the same predicament as that congressman. We have members on both sides of the issue because tariffs affect businesses differently depending on what they make, grow or sell; where they sell it, and where they source components, parts and/or raw materials.
Our members who oppose the tariffs are typically manufacturers who have supply chains overseas and can’t find domestic alternatives for specialty, precision or raw material inputs. One of President Trump’s stated objectives in imposing the tariffs is to force those companies to “re-shore” their supply chains, but that is easier said than done. You can’t just snap your fingers and find a new supplier, which often means you must pay the tariff. Those higher costs add up, eat into profit margins, and create inflationary ripples.
Another concern businesses have with the tariffs is market access. Tariffs provoke retaliation from nations where Wisconsin farmers and manufacturers need to sell their goods and products. Retaliatory tariffs can make U.S. goods unaffordable. It can also make them undesirable if foreign consumers are angry at the U.S. for imposing tariffs on their nation’s products.
On the flip side, many of our members support the tariffs for two major reasons: what they see as fairness and the opportunity for new business.
On fairness, many businesses are fed up with the U.S. opening its markets to foreign-made goods without other nations fully reciprocating. China is the most blatant example. They impose tariffs, manipulate their currency to make Chinese goods less expensive abroad, force technology transfers in exchange for market access, or just steal intellectual property through industrial espionage. They also dump products into Western markets at below the cost of production to bankrupt competitors, and harass foreign businesses operating inside China.
Other complaints include nations imposing value-added taxes (VAT) on U.S. goods, subsidizing specific businesses or industry sectors, and placing various regulatory barriers on imported items.
President Trump says other nations don’t play fair, and a sizable number of Wisconsin businesses agree.
Other businesses see opportunity. I have heard from smaller manufacturers, like tool and die and machine shops, who have won contracts because of the tariffs. One told me they received a lucrative contract from a large manufacturer who had been sourcing a part from China. This machine shop will produce the part using the older machines it currently has on its shop floor but, longer term, plans to invest in state-of-the-art machines, as well as the talent to operate them.
From WMC’s perspective, we have been most concerned with three things: supply chain, market access, and energy.
I addressed the supply chain already, but a bit more on market access. Wisconsin is a manufacturing and agricultural state. We make things, we grow and process things, and we want to sell them around the world. Tariffs threaten access to critical markets, particularly Canada and Mexico — Wisconsin’s top trading partners.
On energy, WMC was initially very concerned when President Trump suggested he would impose a 10 percent import tariff on energy coming from Canada, which is where much of Wisconsin’s fossil fuels are sourced. The President has since backed off from that stance, but Wisconsin remains vulnerable.
WMC members have also been frustrated by the uncertainty and confusion the tariffs have created. Still, there has been little panic from the business community. They have been through this before during COVID-19 when supply chains were stressed or broken, and they had to be resourceful and nimble to keep their production lines operating.
One final point. WMC wholeheartedly supports President Trump’s objective to grow the manufacturing sector as both an economic and national security imperative. But tariffs alone won’t spark a U.S. manufacturing revival. We need pro-growth policies, starting with reauthorizing the 2017 federal tax reforms, tapping into our vast energy and mineral resources, and reducing the suffocating regulatory burden on business.
