The threat of tariffs on imports of steel and aluminum were a major topic of chatter among service truck manufacturers at the annual Work Truck Show in Indianapolis this March.
That’s understandable given that service bodies are often made of steel or aluminum, as are cranes, compressors, welders and other accessories on service trucks.
Leading up to the show, held March 6-9 at the Indiana Convention Center, U.S. President Donald Trump threatened to impose steep tariffs on the metals — even against his country’s neighbors to the north and south. By the time the show rolled around, Trump was already backing off imposing the tariffs on Canada and Mexico, although he held out the prospect that he’d revisit the notion depending on what happens with the renegotiations of the North American Free Trade Agreement.
Following the show, Trump did follow through on his threat to impose the steep tariffs — 25 percent on steel and 10 percent on aluminum — on other countries, including China.
Mark Merriman of Venchurs Vehicle Systems stands by a G.W. Anglin Manufacturing aluminum service body on the Venchurs stand
Signs seen of price hikes
“That is the hot topic at this show,” said Mark Merriman, sales and marketing coordinator for Venchurs Vehicle Systems, a fleet upfitter and truck customizer headquartered in Adrian, Mich.
At its Work Truck Show stand, Venchurs displayed for the first time an aluminum service body from Toronto-based G.W. Anglin Manufacturing.
“It’s interesting because we deal with fabricators when people need custom equipment or parts made for their installs,” Merriman said. “The last time I went to one to pick up some parts, I actually asked that question. And he said he is already seeing it as far as increases in metal pricing — steel and aluminum. Ultimately, it’s going to raise the price for everything they make. So the big news here in talking with everybody is that same issue. And they’re wondering what Trump’s going to do when it comes to the tariffs, specifically with Canada and Mexico.”
Merriman acknowledged the recent news that Trump was already looking at exempting Canada and Mexico. However, Merriman also noted the president’s propensity to change his mind.
“But that could change day to day,” Merriman said. “So everyone is kind of in limbo because we don’t know. It would be nice to predict the future but unfortunately we can’t.”
Trade groups oppose tariffs
The week after the show, the National Truck Equipment Association, which organizes the event, released a statement voicing concerns about the tariffs.
“These tariffs will likely lead to increases in the cost of manufacturing many of the trucks, truck bodies and equipment our membership produces,” the statement said. “Additionally, NTEA is apprehensive about possible retaliatory trade actions that could negatively affect the work truck industry.”
The association is also advocating for a permanent tariff exemption for Mexico and Canada regardless of what happens with NAFTA.
The Association of Equipment Manufacturers, whose members include dozens of service truck manufacturers and accessory makers, also expressed profound disappointment at the tariffs.
“These ‘Trump Tariffs’ will put U.S. equipment manufacturers at a competitive disadvantage, risk undoing the strides our economy has made due to tax reform, and ultimately pose a threat to American workers’ jobs,” AEM president Dennis Slater said in a March 8 statement.
According to the AEM, steel accounts for about 10 percent of equipment manufacturers’ direct costs. In anticipation of the tariffs, steel prices were already rising, Slater said.
Later in March, the AEM launched a 30-second TV ad on Fox News programs such as Fox & Friends and Hannity that praised Trump for recent tax reform and regulatory cuts but warned that tariffs on steel would erase those gains in the manufacturing sector.
“Steel tariffs will be devastating to the 1.3 million men and women of the equipment manufacturing industry,” Kip Eideberg, AEM vice president of public affairs and advocacy, said in a news release announcing the TV ad. “They are not willing to let their jobs die without a fight and are making their case directly to the President through cable news shows he is known to watch.”
Let capitalism be free
At the Venco Venturo stand, company president Brett Collins advised readers to research the Smoot-Hawley Tariff Act of 1930, which many economic historians now blame for worsening the Great Depression.
“My outlook on tariffs is not very positive,” Collins said. “I don’t believe in tariffs. I believe in an open, free market. Capitalism is a great thing when it’s permitted to operate freely.”
Collins said he anticipates “some impacts” from the tariffs but he expressed optimism that they won’t be anything the U.S. can’t handle.
“One thing I just personally can’t stand worse than anything is a knee-jerk reaction,” Collins said. “Our politics and our media kind of loves knee-jerk reaction and big stories. Our president understands that very well, and kind of plays to that.”
But, Collins said, the work truck industry is flexible and will roll with the punches.
The punches have already started flying. China has retaliated against the Trump tariffs with its own tariffs on such products as pork, “which will have a dire impact on Iowa,” the nation’s largest pork producing state, Iowa broadcaster Robert Leonard wrote in a New York Times op-ed on April 1. Iowa is also home to several of the giants of the service truck industry.
Multi-sided issue
Mark Woody, a former NTEA president who is retiring as president of Palfinger Inc., said tariffs pose “a political question I think I should avoid.”
However, Woody went on to note that Trump is “a pretty popular president and the people who voted for him are pretty happy with the direction he is going because that’s what he said he was going to do.”
Then again, Woody can see the tariff issue from multiple sides. He is a dual Canadian-U.S. citizen; and Palfinger is a European manufacturer headquartered in Austria.
“These kinds of trade barriers and those kinds of things typically don’t turn out positively,” Woody said.
He expressed concern for how it will affect consumers.
“There’s only so many dollars to spend,” Woody said. “Maybe on the one hand this new tax cut gave them a little income, a little more money for business. But if it all goes to paying for higher prices for steel and aluminum what did we really accomplish?”
Boom threatened?
Almost everyone interviewed at the show reported on a booming economy in which the biggest challenge for the industry has been keeping up with growing backlogs of orders.
Mandar Dighe, vice-president of sales and marketing for The Knapheide Manufacturing Company, also acknowledged that some of the current favorable business conditions are based on recent policy decisions such as changes to the tax laws.
“The current proposals for steel and aluminum tariffs, will they affect our business? Absolutely,” Dighe said. “If things go one way or another, there will be an effect. I don’t have any idea about how much or what there is. But obviously there could be an effect and if there is I’m sure that the industry and everyone are going to have to determine ways to react appropriately.”
Economists united
A large majority of economists agree that tariffs are a bad idea and that Trump’s tariffs would hurt the U.S. economy. A Reuters news agency survey of 104 economists in March found not one who said the tariffs would be good for the U.S., although a few expected minimal harm.
In the wake of the Trump tariff threats, the stock market has taken a beating. But as Trump critic Paul Krugman, a Nobel Prize winning economist and New York Times columnist, wrote: “The stock market isn’t the economy.” He added that “it’s one of the dirty little secrets of international economics that standard estimates of the cost of protectionism, while not trivial, aren’t usually earthshaking either.”
And Krugman went on to estimate that a trade war that included 30 percent U.S. tariffs across the board would reduce real U.S. income by about 1.5 percent.
The longterm impact of the tariffs would be to turn many global supply chains into stranded assets and strand their workers, causing another dislocation akin to the “China shock” when China emerged as a global manufacturing power, Krugman wrote.
Not everyone affected
One company that won’t likely feel much in the way of adverse effects from the tariffs is BrandFX Bodies of Fort Worth, Texas. That’s because it makes composite bodies.
“It would probably help us if anything,” marketing manager Ben Rookey said of the tariffs. “But we’ll see.”
John Dennehy, a vice-president of marketing and communications for Eberspächer North America, doubted the tariffs will affect his company, even though its climate-control products are made of aluminum alloys. The units, which are made in Germany, receive tariff exemptions because there are no American manufacturers making similar products, he said.
Shortages feared
At the Warner Truck Bodies and Accessories booth, company president Craig Longstreth said there is a fear of an aluminum shortage should domestic manufacturers start scooping up the domestically produced aluminum to avoid the tariff.
“If a lot of people start buying domestic then our fear is in the fourth quarter there might be a shortage of the aluminum product,” Longstreth said. “We’re really seeing a big push in our business toward the aluminum. So we’re working heavily right now to try to fulfill a full year’s buy of aluminum.”
Still, he remains optimistic that the tariffs won’t put a damper on the booming industry. Warner also has a large backlog of orders — what he called “a good problem” — and has installed new equipment to streamline production.
“I guess our main goal is to make sure if where we see that we could have a potential issue that we’re working towards resolving that on a continuous buy basis and then ramping up the year’s supply of product,” he said.
Dean Strathman, Vanair Manufacturing’s vice-president of sales, is happy about the reception the company’s products received at the 2018 Work Truck Show but waiting to see what impacts tariffs might have
Still too early to tell
Dean Strathman, vice-president of sales with Vanair Manufacturing Inc., said concerns had been raised about the tariffs but that it was too early to tell what the effects will be.
“We have heard some manufacturers are already announcing some surcharges,” said Strathman, whose company makes such truck accessories as compressors, welders, generators, and multi-function units. “I’ve heard some others say that they wouldn’t take that approach, that they wouldn’t do that with their customers. We’ve heard some others say that they’re forced to, that they don’t have a choice. We’re standing by for now to see what happens.”
Because companies have so many back orders, if the tariffs do affect sales, it won’t likely happen before the fourth quarter of this year or beyond, Strathman said. “And hopefully we see enough changes between now and then that we don’t see that effect.”
— Keith Norbury