Summary
- Tariff threats create factory floor turmoil at US factories
- US factories fear retaliatory tariffs from Canada and Mexico
- US equipment makers see supply chain snarls if tariffs hit key North American partners
(Reuters) – Stephen Bullock’s phone rang early Monday morning last week at his small factory in North Carolina with an urgent message from his distributor up in Toronto who was rattled by what looked like an unfolding U.S.-Canada trade war.
Two of the machines Bullock’s company produces – bulky contraptions used to lay concrete curbs, highway barriers, and sidewalks – were due to be shipped to Canada in a few weeks. Was there any way to get the 25,000-pound machines on trucks, like, today?
“They said get them here as quick as you can,” said Bullock, President of Power Curbers, who scrambled to pull two finished machines destined for other buyers the next day.
By then, the panic over potential tit-for-tat tariffs between the two neighbors had subsided – though the trucks carrying the $350,000 machines still rolled the 700-plus miles north.
Not even 48 hours after President Donald Trump announced 25% tariffs on Mexico and Canada to take effect on Tuesday, the second-term president put the levies on Canada on hold, hours after unveiling a similar reprieve for Mexico. Canada had vowed to retaliate with its own levies on an array of U.S. goods, including orange juice and trucks. Bullock and his sales team worried his machines would get caught up in the cross-border spat.
That kind of factory floor turmoil illustrates how tariffs can swiftly ricochet through economies, in unpredictable and often costly ways.
Canada is the single-largest U.S. export destination among countries, with roughly $350 billion of American goods sent there last year, roughly 17% of total goods exports of just under $2.1 trillion. Exports to our two bordering neighbors totals $683.4 billion, according to the U.S. Census Bureau.
Trump, on the campaign trail and in his first weeks in office, has extolled tariffs as a tool to boost domestic producers and fill the U.S. Treasury.
And to be sure, some manufacturers love them. Leon Topalian, CEO of top U.S. steelmaker Nucor praised Trump’s tariff plans in a brief statement released by the company last weekend. New tariffs would have boosted steel prices, at least temporarily.
But many other business leaders and groups, including the U.S. Chamber of Commerce and the National Association of Manufacturers, said tariffs on goods from Mexico and Canada – parts of a close-knit North American supply chain – would hurt many domestic producers. Even companies that sell mostly “Made in the USA” goods often rely on Canadian and Mexican suppliers for parts or produce some finished goods there themselves that they sell back in the U.S.
‘DEAL WITH IT’
One big risk is retaliation. When the U.S. slaps tariffs on imported goods, the targeted countries usually hit back with their own fees.
President Trump acknowledged last Sunday that his tariffs may cause “short-term” pain for Americans as global markets reflected concerns they could slow growth and fuel inflation. Economists warn a new surge in prices could slow the Federal Reserve’s moves to cut interest rates.
Kip Eideberg, senior vice president of government relations at the Association of Equipment Manufacturers, noted that 30% of all the equipment made in the U.S. – everything from tractors to bulldozers – is exported. Canada is their largest market.
“Equipment manufacturers across the board, across product segments, are moving equipment up to Canada in anticipation of these tariffs being levied,” he said, referring to both U.S. tariffs and expected retaliation. The levies could come back into play in a month if a longer-term deal or another reprieve is not reached.
Eideberg said that while there’s heavy focus on the auto industry, it’s not unusual for parts or materials in his industry to move across a North American border five times as it goes through the production process.
Some domestic producers are resigned to rolling with the volatility of tariff threats, even when they know they may be hit. Speaking to investors in late January, Caterpillar CEO Jim Umpleby said: “We’ve been around a hundred years, and we’ve seen many different administrations with different attitudes on these issues (tariffs) – and we’ll deal with it.”
Jochen Zeitz, CEO of Harley Davidson, struck a similar tone in an investor call last week, noting their manufacturing is concentrated in the U.S. and even their sourcing of parts is “U.S. centric.” Even so, motorcycles were on the list of products Canada planned to hit with retaliatory tariffs.
CLOUDING THE OUTLOOK
Some companies that stand to benefit from tariffs say they’re seeing gains even before the new taxes are implemented, as customers increasingly look for ways to minimize their exposure. For instance, Kaysun, a small maker of high-tech plastic parts used in medical, industrial, automotive, and consumer products in Manitowoc, Wisconsin, has seen more interest from prospects looking to buy American.
Ben Harrison, the company’s CEO, said he got a visit from a company two weeks ago that currently has parts made in Mexico and Asia. “They’re looking to start bringing in products from those countries because of higher costs,” he said.
Tariffs did go up this week by 10% on U.S. imports from China, which hasn’t yet forged an agreement to postpone the taxes.
Back at Power Curbers, CEO Bullock said he’s continuing to plan for tariffs on more countries and regions, including the European Union, another big market for his machines. The company, which employs about 125 workers, exports to over 100 countries. Canada is its largest foreign market.
He would like to rush more goods north now, he said, but his assembly line is constrained by the availability of parts and the need for additional workers. To get more goods to Canada, he said, he’ll need to juggle production schedules to see if he can postpone shipments to some domestic buyers to free up supply.
Until recently, this was shaping up to be a good year. Bullock had projected business would grow about 10% in 2025 and had planned to expand production in April by hiring an additional half dozen workers.
Tariffs have cast a shadow on that. “We can’t make that kind of long-term decision,” he said, “until we see how this all plays out.”
Reporting by Timothy Aeppel; Editing by Anna Driver and Dan Burns
