HIBBING, Minn. – The taconite mines are back in action, factories are expanding and new stores and restaurants are popping up from Grand Rapids to Silver Bay.
Minnesota’s Iron Range is experiencing an economic revival that seemed unlikely as recently as two years ago, when idled mines and job losses battered the region.
“Obviously the entire economy up here rotates around the mines. So if the mines are doing good, then we all do good,” said Erik Leitz, who with his wife opened the BoomTown Brewery & Woodfire Grill in Hibbing six months ago.
A newfound optimism will greet President Donald Trump when he makes his first visit to northern Minnesota on Wednesday.
The Iron Range is Trump country. He won big in 2016 in the Eighth Congressional District, which includes Hibbing and other key mining cities. A Star Tribune Minnesota poll taken in January found that 70 percent of northern Minnesota’s residents approved of the way he was handling the economy and jobs.
On Friday, Trump said he would move forward with tariffs on $50 billion in Chinese goods — a welcome move for the U.S. iron ore and steel industry — and on Monday threatened another $200 billion in tariffs if China moves forward with retaliatory tariffs. Not long ago, the industry was deeply affected by the dumping of underpriced steel from China and other countries, and the global steel glut that followed. The president also has announced tariffs on steel and aluminum from Canada, Mexico and the European Union.
“The president’s decision is critical,” said Kelsey Johnson, president of the Iron Mining Association of Minnesota (IMA). “We have consistently said we need a level playing field for our prices to be competitive. We can’t compete with government-owned iron ore-making facilities” like those in China.
Yet even here, amid the blue-collar industries that Trump said his policies are designed to help, there are concerns that his protectionist mind-set could hurt as many people as it will help.
Already, factories and even the mining operations are seeing hefty price increases for metal materials necessary to make their products.
Minnesota Twist Drill in Chisholm is growing, hiring and planning a small addition to its plant next year. L&M Radiator in Hibbing already has a 100,000-square-foot addition in the works.
But both companies are concerned about tariffs.
“Here, we wave the American flag. But if [these tariffs cause] collateral damage that results in the loss of employees, that is just backwards. I see that as counterintuitive,” said Scott Allison, president of Minnesota Twist Drill, which has grown from about 50 workers in 2009 to 135 now. “I have 135 mouths to feed. And I am worried about them.”
By instituting the tariffs, Trump believes the U.S. steel industry will grow and stop suffering from cheap steel imports. In the long term, Trump said, U.S. companies will benefit.
The United Steelworkers, the union representing workers at the major mining operations, supported Trump’s call to issue tariffs on Chinese goods.
“These decisions affect real lives,” said Cliff Tobey, president of USW Local 2660, who works in U.S. Steel’s Keetac ore mine and taconite plant in Keewatin, Minn.
He said Keetac idled its plant for a year, and its workers were out for 20 months, due to China’s dumping and historically low global taconite prices. Keetac reopened last year.
Tobey voiced his support of tariffs just before Trump told leaders in Canada, Mexico and the European Union that U.S. tariffs would extend to them as well.
Two weeks ago, the USW condemned tariffs on Canadian imports, expressing its “profound disappointment” at “our flawed trade policies,” which the union described as “wrong-headed” and “undermining.”
In response to U.S. tariffs, Canada vowed to tax $264 million worth of Minnesota products beginning July 1. Much of that is taconite. Roughly a third of Minnesota’s 40 million tons of taconite gets shipped to Canadian customers each year, according to the IMA.
The U.S. threat to levy tariffs on Canadian goods is widely seen as Trump’s attempt to gain more leverage in renegotiating the North American Free Trade Agreement (NAFTA), said the IMA’s Johnson.
She also believes Trump’s original proposal to cut Canada’s steel-import quota “incentivizes our ore producers to be at the forefront of trade rather than an afterthought.”
However, some mining officials admit privately that if Trump’s administration doesn’t come to an agreement with Canada, the tariffs could pinch mining profits.
Separately, some taconite workers said they have already seen tariff-related price hikes on equipment like the steel crushing-balls and rods that smash ore boulders into pebbles.
Companies like Minnesota Twist Drill and L&M Radiator are hoping they can pass the added costs on to customers.
L&M Radiator makes massive cooling systems for mining, dump and fracking trucks as well for construction excavators and bulldozers. It sources copper, steel and aluminum worldwide.
“As soon as Trump made his announcement, our suppliers sent us letters saying that due to the steel tariffs we were going to see an increase in our material costs. And we use a lot of metal,” said Dan Chisholm, who runs the 61-year-old L&M Radiator Inc. in Hibbing with his sister, Laura Chisholm Ekholm.
L&M is growing again “after four years of tough sledding” that included shutting down two plants, Chisholm said. It now has 250 workers, is building an addition and expects to again reach $100 million in sales this fiscal year.
But the tariffs have put L&M on alert.
“We are watching that stuff very closely,” Chisholm said. “The majority of our business is [made for] original equipment manufacturing customers. And they are all over us any time we talk about a price adjustment. So we have to keep our pencil sharp.”
Seven miles up the road, at Minnesota Twist Drill, the tariff question weighs heavily on Allison’s mind.
“Our Canadian customers are saying, … ‘If any of your price increases are in the name of U.S. tariffs, we may be looking elsewhere,’ ” he said. “If we start losing business to China or to Canada, or lose workers, I see that as counterintuitive as to what the U.S. is trying to do.”
In March, one of Twist Drill’s smaller suppliers in China and a larger one in Japan raised their steel prices by 25 percent in response to Trump’s tariff proposals.
Allison absorbed the higher price for the Chinese steel. But he terminated his relationship with the Japanese vendor, thinking that might be the end of it.
But the high-alloy and heat-resistant steel that Twist Drill needs to make its bits mostly comes from other countries. There is only one U.S. supplier. Others are in France, Austria, Brazil and China.
Twist Drill also exports some drill bits to customers in Canada and Europe, meaning the firm could get hit by retaliatory surcharges.
“The government has just instituted a 10 to 25 percent disadvantage on U.S. manufacturers like us. That’s huge,” Allison said. “As far as worry goes, this has been probably equal to the 2008 [recession] crash. It’s turned us topsy-turvy.”