‘I’m in Big Trouble.’ What It’s Like Inside American Firms Hampered by Trump’s Trade War

September 5, 2018, 11:55 AM UTC

Blue Ridge Home Fashions’ problem is feathers. For Empire Today, it’s vinyl planks. At Jammy, there’s a whole bunch of things, from tail lights to reflective tape.

All three companies are on the losing end of President Donald Trump’s trade war with China. Their supply chains have been disrupted, their planning and forecasting thrown into chaos. The whole experience has been, in the words of Jammy Chief Executive Officer Ralph Bradley, a “real kick in the ass.”

The next blow could come this week, with tariffs of as much as 25% hitting $200 billion in goods, including materials and parts these businesses buy in bulk. The Trump administration has avoided putting duties on finished products, like smartphones and sneakers, for fear of a consumer backlash at home as it aims to punish China. But as it turns out, the president who vowed to boost U.S. manufacturing is hammering some of the companies that managed to survive globalization and thrive.

Since Trump kicked off trade disputes with a big chunk of the world, these companies have been navigating to limit the financial pain — and traverse the confusion. One day, a deal with Beijing seemed possible; the next, the president would vow to slap levies on everything the Asian nation sells to the U.S.

“They’ve thrown so many unknowns into it that it’s made it challenging to make any long-term strategic decisions,” Bradley said. “It’s a reason for loss of sleep.”

The first round of import duties on China hit $34 billion in products in July, the next on $16 billion worth in August. The $200 billion question has been hovering for weeks. It’s all made for “a lot of volatility here in tariff world,” said Carol Tome, chief financial officer of Home Depot.

The smaller the enterprise, of course, the more difficult the challenge. They don’t have the economies of scale, the back-office staff, the lobbying forces or the deep pockets to roll with the punches as a Home Depot-size company can do.

Jammy, an auto-parts importer Bradley’s dad started almost half a century ago in Forth Worth, Texas, has 11 employees and recorded $12 million in revenue last year. It embraced globalization in the ’80s, forging a joint venture with a factory in Shaoxing, in eastern China, that makes the injection-molded plastic and bent tubular steel Jammy needs to fashion tail lights and other parts for everything from giant lawnmowers to combines made in the U.S.

“It’s impossible for a company like mine to just change their manufacturing location,” said Bradley, 39, who estimated Jammy has put $5 million into the Shaoxing plant. “I have too much invested over there.”

The tariffs that went into effect on Aug. 23 included reflective tape — the kind that goes on the sides of tractor trailers — so Bradley paid $7,500 to air-freight 1,700 rolls a few days before. That was about ten times the cost of shipping by boat, but he had orders to fill.

And he spent so much of the summer scrambling, talking to customers and his sales team about how to steer Jammy through the trade war, that he let other projects slide. He’d been planning to hire two people in logistics and marketing but hasn’t found time to even write the job descriptions; installing a new computer system was put on hold.

If the latest round of tariffs proposed by Trump is implemented, parts in fully 85% of the products Jammy sells will suddenly be as much as 25% more expensive. Passing that on would share the pain with customers including Bain Capital’s American Trailer Works Inc., which makes utility and cargo trailers.

At Blue Ridge, based in Irwindale, California, there’s a different level of stress-out. The company’s second factory just opened in an old steel plant in Allentown, Pennsylvania, that’s big enough to add more sewing machines. The Trump tax overhaul reduced corporate tax rates for this year and gave CEO Ning He the capital to expand with the new facility, at a cost of more than $1 million.

Then Trump put feathers on his $200 billion tariff list. China is by far the biggest producer of fluffy down plucked from geese and ducks, the kind Blue Ridge stuffs into about 70% of the pillows and duvets it makes for retailers including Macy’s and Costco Wholesale. There isn’t a lot of wiggle room for the company, which employs around 100 people and has had about $100 million in sales over the past three years.

“I’m in big trouble,” said Ning, 55, who became a U.S. citizen after immigrating from China three decades ago.

The way Trump is waging this trade war doesn’t make sense to him. “My first reaction was this is stupid. If they are doing this smart, I have no complaint. The decision looks like it was made by someone doesn’t understand the industry. Maybe they don’t know down feather comes from duck and goose. Maybe they think it comes from chicken?”

Blue Ridge’s retail accounts want current prices locked in for next year — and they can easily switch to one of his big Chinese competitors, whose finished products aren’t under any tariff threat. That’s why Ning is considering moving his own production lines to that country. In the meantime, he’s rushing to import as many feathers as he can and hoping for a resolution between the White House and Beijing.

“Everyone is very panicked,” Ning said. “I hope they can reach a deal.”

Keith Weinberger, CEO of Empire Today, wasn’t terribly worried in the beginning. He thought he had everything under control as he finalized a presentation on July 30 for the board on dealing with tariffs of 10% on the luxury vinyl planks the home-flooring and carpet installer imports from China. Empire’s suppliers there had agreed to eat the cost for a while in exchange for a certain level of committed orders. Empire, with $700 million in annual sales, has the wherewithal to provide that.

But two days later, Weinberger’s plans were torched when Trump ordered his administration to consider pushing the duties to 25%. The company, based in Northlake, Illinois, sources all its carpet and a lot of its other flooring in the U.S., but this kind from China — what the industry calls LVP — is the fastest-growing part of its business. There’s some production in America, but not nearly enough to meet demand.

“It’s not what I want to be spending my time on, but I’m worried about the impact this is going to have,” said Weinberger, 46, who started his career at Procter & Gamble.

So Empire recently hired a lobbying firm to help out in Washington. “We’re hoping for an exemption — we’re just trying to do anything we can think of.”

On Thursday, he and the others may have a clearer picture of the future. That’s when the public-comment period on the proposed tariffs closes and, according to people familiar with the matter, Trump wants to move ahead with his plan.

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