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LI factories have high hopes in trade war

Small firms expect tariffs to translate into more local manufacturing and jobs.

Haig Graphic Communications president James Kalousdian checks pages

Haig Graphic Communications president James Kalousdian checks pages at the company's Hauppauge printing plant. Photo Credit: Anthony DelMundo

 Factory owners and workers on Long Island are backing President Donald Trump's decision to raise tariffs on U.S. trading partners. 

Some said they hope the new policy will spark a resurgence of local manufacturing and the good-paying jobs that  come with it. 

Small manufacturers, such as Haig Graphic Communications Inc. in Hauppauge, have lost sales to foreign rivals with lower prices. Others such as Die-Matic Products LLC in Plainview and Central Machining Specialties Inc. in West Babylon are defense contractors who say they worry that U.S. military preparedness is being undermined by the withering of domestic steel and aluminum production.

Leaders of the Long Island Federation of Labor, an umbrella organization of unions with a total of 250,000 members, see Trump’s tariffs as a step toward reversing decades of trade policy that encouraged manufacturers to send work overseas.

Opposition to the new tariffs comes from retail chains, multinational corporations, farmers and economists. They said increased tariffs on imported goods will depress consumer spending, which accounts for about 70 percent of economic activity on the Island and in the country. Some have predicted an economic slowdown because of escalating U.S.-China trade tensions.

Tariff supporters, such as Haig Graphic president James Kalousdian, said Trump's real estate career in New York City gives him “an understanding of how to leverage against these foreign countries that have taken advantage of us for decades.”

He continued, “Tariffs are leveling the playing field . . . We don’t mind competition, but we want it to be fair competition.”

In 1996 Haig Graphic moved to its current facility to be closer to its largest customer. Nine years later the customer started printing its catalogs in China.  

Haig Graphic has since diversified into printing on plastic as well as paper. Its 42 employees use three gigantic printing presses to make children's activity books, direct-mail pieces, coupon books, in-store signs and discount prescription drug cards. The 75-year-old company said its sales exceeded $8 million last year.

“I’m hoping [Trump] will put tariffs on printing and packaging that comes from China,” said James' brother, executive vice president Steven Kalousdian. “And when manufacturing does come back to the United States, some of that business will come to us if there is a tariff on Chinese printers.”

However, the Business Roundtable, which represents CEOs of large corporations, has criticized Trump's tariffs policy, saying it "will cause unnecessary harm to America's economy and workers." 

Anxiety in the industrial Midwest over job losses since the North American Free Trade Agreement went into effect 25 years ago helped Trump win the White House.  Among his first acts as president was to withdraw the United States in January 2017 from the proposed 12-nation Trans-Pacific Partnership free-trade agreement, or TPP.

This year Trump has hiked tariffs a half-dozen times, most notably on imported steel and aluminum in March, and on $200 billion worth of Chinese products in September.

The metals tariffs were met with retaliatory taxes by Europe, Canada, Turkey and others. China responded to the U.S. tariffs on its goods, which were levied in three rounds with the latest six weeks ago, by boosting taxes on $110 billion worth of U.S. products.

“Trump did the right thing when he pulled out of the TPP,” said Arnold Klein, president of components manufacturer Die-Matic Products in Plainview. “The U.S. shouldn’t be signing a free-trade agreement with countries where the workers’ wages and benefits are substantially lower than what we pay in this country. That’s unfair competition.”

Free-trade agreements reduce tariffs and other barriers to trade between countries. Besides NAFTA, the United States has signed free-trade agreements with Australia, Israel, South Korea, Colombia and 14 others, according to the U.S. International Trade Administration.

Die-Matic, with a workforce of 20, makes assorted metal and plastic parts for parachutes, oxygen masks for fighter pilots, store shelves and other items. Nonmilitary orders, which account for 35 percent of the company's annual sales of $3 million to $4 million, have fallen in recent years because of competition from Vietnam, China, India and Dubai. Vietnam is a TPP member.

“The U.S. has to do something about unfair trade because we are being beaten on every front because of China and the Far East,” Klein said. “President Trump should keep increasing the pressure until they agree to trade fairly.”

Still, opponents have formed lobbying groups, Americans for Free Trade and Farmers for Free Trade, to urge Congress to reverse Trump’s actions. So far, he has agreed to $12 billion in subsidies for farmers hit hard by retaliatory Chinese import taxes on U.S. soybeans, pork and other agricultural products.

“Tariffs are taxes on American consumers,” said Matthew Shay, president of the National Retail Federation in Washington, which represents Walmart, Home Depot, Macy’s and other large chains. “These tariffs won’t reduce or eliminate China’s abusive trade practices, but they will strain the budgets of working families by raising consumer prices.”

NRF projected in May that a trade war with China could throw at least 455,000 Americans out of work, with New York among the 10 states forecast to have the highest number of pink slips. 

These dire predictions were challenged by economist Robert E. Scott, director of trade and manufacturing policy research at the Economic Policy Institute, a union-backed think tank in Washington.

He estimated this year's tariffs’ rise has boosted the cost of imported steel and aluminum and $50 billion of Chinese goods by  about $20 billion annually, or one-tenth of one percent of the gross domestic product, the sum of all goods and services produced in the United States. “It’s hard to see how that can slow down economic growth or affect inflation,” he said.

Scott also called for reducing the U.S. dollar's value by 30 percent  because of persistent  layoffs in the United States due to the trade deficit. He said the cheaper dollar would reduce the price of U.S. exports, thereby narrowing the imbalance, or deficit, between the amount of imported goods and U.S. exports.

Last month, Scott said 3.4 million U.S. jobs were lost to trade with China between 2001 and last year, including almost 29,000 on Long Island. Manufacturing accounted for three-fourths of the pink slips, particularly at producers of computer and electronic parts. 

"What we really need to do to rebuild demand for U.S. manufactured goods [among foreign consumers] is to lower the value of the dollar like President Reagan did in 1985 and President Nixon did in 1971 . . . That would close the trade deficit because U.S. exports would be cheaper,” Scott said. 

Locally, the owners of small factories said they are willing to pay more for steel and aluminum as a result of higher tariffs if it means a rebound of the domestic metals industry.

Fabrotech Industries Inc. in Ronkonkoma has seen a 10 percent to 15 percent rise in the cost of steel, cast iron, bronze and other metals that it uses to make strainers. The strainers remove sediment from pipelines that carry oil, natural gas, water and gasoline.

“People blame the price increases on the tariffs, but the increases that I’ve seen are based on a stronger economy,” said Jeffrey Redelman, president of Fabrotech, which has a workforce of 10 people. “We’ve passed along the higher costs to our customers with no problem . . . We face little foreign competition because we’re in a niche market” served by five to seven companies.

Still, he said he worries the Chinese businesses that supply metal castings to Fabrotech will someday cut out the company, using its designs without permission. The castings represent two-thirds of Fabrotech’s annual sales of more than $4 million.

“A guy in China once told me, ‘We have your strainers, your patterns,’” Redelman said. “So I’m worried about counterfeiting . . . I’d love to make these castings in the U.S., but I don’t think there are companies left here who do the work.”

He also said Fabrotech is producing more on Long Island to reduce its dependence "on factors that we cannot control" and to improve profits. "I think it's prudent to make provisions stateside and rely less and less on China," he said.

Businesses aren’t the only supporters of Trump’s tariffs.

Labor unions, which disagree with the president on many issues, are praising his "America First" protectionist stance.

“Our trade laws, under Democrats and Republicans, have hurt American workers for decades,” said Roger Clayman, executive director of the Long Island Federation of Labor. “So people are reacting positively to what they see as some action being taken irrespective if it’s the real answer to the problem. To see people sound off about trade policies, which have hurt jobs, businesses and communities, is something that’s welcome,” he said.

Clayman and others expressed optimism that the Island will benefit from closing the trade deficit with China, though it could take years to achieve.

At Central Machining Specialties, founder and president Nick Lore hopes to receive additional orders for his metal components, which go into finished products and are replacement parts for machinery.

“Somebody has to make it,” he said, pointing to components for missiles, tanks, aircraft and submarines. The military accounts for 75 percent of the company’s yearly sales, which total more than $1 million.

A dozen employees are working 10-hour shifts in Lore's West Babylon factory to fulfill larger orders, thanks to an increase in the defense budget under Trump and his pressure on Europe to follow suit.

“As a country, we have to have manufacturing for our security,” said Lore, an Army veteran. “If the administration sees an imbalance in trade with another country, they should correct it. Obama and [George W.] Bush looked the other way. I agree with Trump’s strategy.”

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