Biz leaders take wait-and-see view on possible higher tariffs

Ron Bogart: Gold Mechanical stockpiles steel when prices are favorable.

Will Cox: Tariffs should spur more domestic solar panel manufacturing.

Jeff Jones: Tariffs raise the price of goods for U.S. consumers.

• 
• 
• 

Seeking to boost U.S. manufacturing, President-elect Donald Trump on the campaign trail proposed stiff tariffs on various imported goods – particularly targeting China. It’s a strategy that some economists say could result in higher costs for Americans as national retailers that have some of their products made overseas mull product price hikes.

Officials with Walmart and Lowe’s are among those speaking of challenges the retailers could face due to the potential trade policy change, according to media reports. While campaigning, Trump said he would impose a 10% to 20% tariff on all imports, including levies of 60% for goods from China.

While Trump could choose to change his tariff plan upon taking office, local officials are taking a wait-and-see approach.

“We don’t know for sure yet what Trump’s going to throw out there,” said Ron Bogart, CEO of Springfield-based mechanical contracting company Gold Mechanical Inc. “We can speculate, of course; we can look at history.”

Part of that history includes 2018, when Trump imposed tariffs on imported steel and aluminum. Steel tariffs were set at 25%, with 10% for aluminum, according to past Springfield Business Journal reporting. In all, Trump implemented sweeping tariffs on about $380 billion of Chinese-made products when he was in office. President Joe Biden has kept those tariffs in place and earlier this year decided to increase some of the rates on about $15 billion of Chinese imports.

The tariff rate on certain steel and aluminum products increased in September to 25% from 0%-7.5%. The tariff rate on semiconductors will increase to 50% from 25% by 2025. The tariff rate on electric vehicles increased to 100% from 25%, according to a news release from the White House.

Tariff environment
Jason Carson, president of general contractor Carson-Mitchell Inc., said his construction company has gotten accustomed to navigating the tariff environment. Imported steel, aluminum and copper – all targets of tariffs – are in myriad construction components. He said the tariffs combined with higher inflation has led to roughly 20% increases in prices of those materials from suppliers.

“We pass that cost on to our customers,” he said, noting the company averages around 20 projects annually, most of which are in the Springfield area. “So, it just increases the cost of building.”

Factoring in increases to project costs will likely continue as tariffs show no sign of a diminished impact on construction jobs, Mitchell said.

“There’s nothing that we can do to get around it because tariffs are going to increase the cost of both foreign and domestic products because domestic producers will increase prices in line with imports,” he said. “You can’t really offset that.”

While Mitchell said he’s aware of tariffs getting attention from the Associated General Contractors of America, he said discussions of it have been quiet within the Springfield Contractors Association, for which he is a board member.

“I don’t know that we’ve had any jobs canceled or delayed, but it’s certainly been a topic for a couple of years with the increase in construction cost,” he said. “It’s been a big deal. It’s certainly a concern for us.”

It’s less of a concern for Bogart’s company, which he estimated sources 99% of its steel domestically. He said tariffs are probably increasing steel prices around 5%.

“It’s just one of those things that we sense the market and when we know the market’s going to go up, we just build that into our pricing,” Bogart said. “It won’t affect us personally, unless the cost becomes too much to bear for our clients and they stop doing projects. We might get to that place.”

As Gold Mechanical uses a lot of steel for its projects, Bogart said his company frequently watches market prices.

“When we feel like it’s bottomed out, we will buy a ridiculous amount more [steel],” he said. “Ridiculous for us is half a million pounds and we’ll bring it into our building and then markets will shoot up. And while everybody else is struggling to buy and sell more expensive metal, we’ve got a bit of a built-in advantage. And so, we’re landing more jobs here in that time because our cost basis is lower.”

Carson said his company doesn’t stockpile material but will place advance orders when prices are favorable.

“With the supply chain constraints we’ve had over the past several years, we did start buying ahead for each project. We will get a large project and buy as much of the material earlier than we would normally have done so,” he said. “A typical construction project might be 12 months, so we might buy things we might not typically need for another six months.”

At Solera Energy LLC, CEO Will Cox said interest rates and the overall health of the economy has a greater impact on business operations than tariffs. Still, he is hopeful that if tariffs do increase as Trump desires, it will spur more domestic production of materials for the solar industry.

China dominates the global solar supply chain, holding over 80% of the market share across all stages of manufacturing, Cox said. Noting there are many manufacturing facilities in the U.S., he said the primary challenge lies in sourcing raw materials. Polysilicon wafers, a critical component for producing solar cells, are almost exclusively manufactured in China. At present, there are no American factories capable of producing solar wafers at scale, he said.

“This is going to cause manufacturers to expand their business opportunities into other markets and also potentially have more viable manufacturing opportunities here in the U.S. for solar panels,” he said. “It’s going to cause us to be more creative and open up more lines with different vendors and manufacturers.”

In a recent online poll at SBJ.net, 49% of respondents said the proposed tariffs would impact the way they do business. Another 40% said it would not impact them, while 11% were unsure.

In analysis
Tariffs can sometimes be punitive by nature, said Jeff Jones, associate dean for the College of Business at Missouri State University.

“What tariffs universally do is raise the price of goods for U.S. consumers,” he said. “Now, on the flip side, it does generate revenue for the government, so it could be considered an alternative way of financing governmental operations.

According to an October report from the nonpartisan Committee for a Responsible Federal Budget, Trump’s tax proposal could cause the national debt to rise $7.5 trillion from its current level of roughly $36 trillion. His only major revenue-raising provision would be to increase tariffs, which would bring in $2.7 trillion.

In 2023, goods imports totaled $3.1 trillion and imports from China totaled $421.4 billion, according to an analysis by nonpartisan, nonprofit Tax Foundation. With no behavioral effects, the universal tariff would raise taxes by $311 billion, while separately lifting the average tariff rate on Chinese goods to 60% would raise roughly $213 billion.

While Jones acknowledges tariffs raise money for the federal government, he wonders what the overall cost will be for the American consumer.

“If it raises prices for the average consumer, then essentially their discretionary income is reduced,” he said, noting dependability on foreign produced goods also is reduced. “It’s a very complex situation.