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DOES THE TRADE WAR EVEN MATTER?

Reporter/producer

Jelliff Corp is a family-owned manufacturer of wire and mesh products. It’s been operating out of its original factory in Southport, CT, since 1880, and also imports finished and raw goods from China. Annual revenue is about $7 million. Rand Glucroft is Jelliff’s vice president of finance. He’s been with the company for more than 20 years.

 

Could you give me a line about how the trade war is affecting business?


It has a direct impact on the cost of the materials, cash flow and prices to our customers. It is difficult to pass on a 25 percent increase and it’s impossible to absorb. You are hindered by paying the tariff upfront and then waiting 60-90 days for your customers to pay. Under-financed companies will be cash poor very quickly, as importing fees go from a few thousand dollars to tens of thousands.

Do you consider Jelliff to be one of those companies?


Yes.


How long have there been tariffs on your products?


Since September 2018, when the first round of tariffs took effect — considered as List 1, and when the tariff on steel and aluminum came into effect.


What have the tariffs cost you so far?


Approximately $25,000 in tariff fees per month. That makes cash much tighter, which restricts other projects, pay increases, etc. As a small business we do not have easy access to a bank line of credit. Funding is coming from our China vendors who have accepted delays in payments. We have slowly raised our prices to customers and have received lower prices from China to help improve overall revenue.


Does that mean China is footing the bill?


No. I still pay the full amount to China over a longer period of time. They’re just extending us credit. At the end, the consumer pays.


And your customers? Have you lost any, or are they ordering less?


We have lost several.


What would you say is the total loss to business?


We are down eight percent in the product line dependent on China material. Some of it is totally due to the tariff, based on customer conversation. Other loss is due strictly to competitive prices, which could be how our competitors are incorporating the tariff.


So that’s just your China business. What about business overall?


I think the overall effect will be zero, as companies and consumers will just accept the higher cost of doing business and higher retail costs. Very few companies will spend the millions needed to move a factory back to the States, not knowing the long-term trade war. Will the next president remove the tariffs? The costs of finding the land, erecting the building, zoning and environmental laws, lack of skilled labor — it will impact that decision. Companies need the long term to make the investment profitable.


So, short term pain for no long-term gain?


That's how I see it  Does the average American want to sit at a sewing machine making a shirt or a pair of shoes, or soldering the parts for an iPhone? An immigrant maybe, but the border is closed.


In which case, who cares about tariffs?


No one, as we will adjust.


So, then. What's the problem?


The cash from the tariffs is going to the U.S. government when it would do better going in my pocket.


Is that you saying this or are you channeling the zeitgeist of American individualism?


Me.


But, as you say, you'll adjust. So again, who cares? If even you, trying to run a small manufacturer in a trade war, are saying it doesn't matter, then what are we talking about really?


There’s short-term pain for importers, but it will balance out in the end.


What if there is no end? What if this is the new normal?


Then we might all go bankrupt.


Define "we.”


Small business in general, farmers, and those who are facing the tariffs and need cash.


Some farmers have been reported in the media as saying they’re hurt by the trade war but support it because something has to be done about China's "unfair" trade practices and monetary policies, etc. Do you agree?


I agree that something has to be done, but it is 30 years too late. Punishing the American consumer is not the answer. Working diligently with China to open their door to all goods with no tariffs, stopping currency manipulation, would resolve most of the problems.


But isn't that exactly what Trump and his trade chief are trying to accomplish with the tariffs?


Are tariffs really working?


That's what I'm asking you!


Tariffs do not work, as both sides can tariff each other and everyone loses.


Maybe it’s too early to tell if they’re working.


Maybe.


Then what is the consequence? You say it's impossible to get out of China, so there is no threat to them of an alternative. You also say there's no point punishing them.


Not impossible to move, just costly. Business slowly moves to other low-cost countries, but not back to U.S.


How does the trade war compare to previous economic challenges? I’m talking specifically the recession a decade ago, but historically speaking, too, given how long Jelliff has been in business.


This is nothing as compared to the recession.

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The interview took place on September 5. It’s been edited for clarity, style and length.