On Friday, the Wall Street Journal reported President Donald Trump has agreed to a half-a-loaf trade agreement with Beijing that will ease tariff rates on some Chinese goods and cancel new taxes set to take effect Sunday, in order to boost Chinese purchases of U.S. farm goods.
Regardless, St. Paul speaker manufacturer Dan Digre, who hasn’t voted for a Democrat for president for 40 years, has had it with Trump’s trade war.
Digre’s 100-employee firm, Misco, started as a radio-repair firm by Digre’s father after World War II, is one of the last of the U.S. manufacturers that make industrial speakers used by airlines, automotive and other equipment manufacturers.
Misco, founded as Minneapolis Speaker Co., imports only some components from China that are no longer made in America.
Misco designs, fabricates some parts and assembles in a St. Paul facility it moved to earlier this year for expansion. Instead of a new product line, Digre is using that money to pay tariffs on Chinese parts. And he traveled to Asia last week to find an alternative supplier to China.
Moreover, he’s had it with Trump telling the public that the U.S. tariffs ranging to 25% are paid by the Chinese.
“It’s hundreds of thousands of dollars I’m paying,” said Digre, who said 40% of Misco profits are taken by tariffs. “I pay 25% on parts I need to build speakers in America. My competitors who build speakers in China and import into the U.S. pay 15%. That’s not right.
“I could say, ‘OK, I’ll build in China. Then I’ll pay lower taxes.’ That is messed up. Manufacturing in the U.S.A. is a core part of who we are and what we do. And laying off people is the last thing I would do.”
Digre was spending a pretty penny last week to travel to the Philippines to explore alternative component manufacturers.
“I could move some parts to Philippines from China,” Digre said. “But I’ve custom-tooled thousands of parts. I would have to retool everything. That could be millions in tooling expenses. And that could take two to three years. But if I don’t think tariffs are going away, I better start spending to retool and find new vendors. Meanwhile, I’m not reinvesting in what will keep me competitive in the future.”
U.S. corn and soybean farmers have received nearly $30 billion in subsidies to offset their tariff-related losses with China. Most of the money has gone to huge operators; at the same time U.S. commodity prices are depressed, forcing tough times on a lot of family farmers.
“The longer this goes on the worse it gets,” Digre said. “It’s a very challenging problem. Discouraging. Our government is doing this to us. They’re doing it to our farmers. There’s something wrong with a strategy that throws small business and small farmers under the bus.”
Digre has met with U.S. Sens. Amy Klobuchar and Tina Smith, who are sympathetic but also unable to move the Trump administration.
We do now know that trade wars are not “easy to win,” as Trump once asserted. The Trump administration has ranged from hinting at imminent big deals with China to suggesting that Trump is content to wait out China until after the 2020 elections.
Minnesota businesses have paid an extra $704 million on products subject to Trump tariffs, including $72 million in September, according to data collected by the Trade Partnership and distributed by Tariffs Hurt the Heartland, a group of businesses and farmers, including Digre.
“The consequence that we’re most concerned about in agriculture is that once you lose [the] market, it’s hard to get it back,” Kevin Paap, president of the conservative-leaning Minnesota Farm Bureau, said last month.
Matt Moore, general counsel at Bloomington-based Quality Bicycle Products, which employs 800 and sells 48,000 parts, accessories and bicycles, told the Star Tribune last month that China-related tariffs equal about 40% of profits.
Moore traveled to Washington, D.C., to argue that bike helmets and safety lights should be excluded from the tariffs because they are safety items. The products inexplicably were dropped from one round of tariffs, but then added to another.
Moore spent one week asking the Office of the U.S. Trade Representative for an exclusion on six specific imports. None of his applications were approved.
“It’s been a drain on resources with no certain result, but the only way you can possibly get one is to try, so that’s what we do,” Moore said.
The Trade Partnership has called on the U.S. to end Trump’s trade war.
Some commentators, noting that China always takes the long view and historically doesn’t knuckle under to foreign pressure, are at a loss to say how this ends well. Unless Team Trump can pull off a real deal and explain its benefits clearly this month.
Before the apparent agreement, tariffs of about 15% on $160 billion in Chinese exports to the U.S. were set to take effect on Sunday.