Talking tariffs

 

John Carr, owner of Adirondack Pub & Brewery in Lake George, is closely watching the effects of new U.S. tariffs, as he relies on imported malt and barley to produce his lagers and ales. Joan K. Lentini photo

 

By MAURY THOMPSON
Contributing writer

GLENS FALLS, N.Y.

At Miller Mechanical Services, a local machining company that works mainly for the pulp and paper industry, a $1.2 million project originally planned for January was postponed until summer.
But as of mid-May, it appeared the project, for a company that does business internationally, might be delayed even longer because of new tariffs on aluminum and steel.
Elizabeth Miller, the president of Miller Mechanical, said she was weighing whether to order materials to be ready to start the project — or to scramble and schedule other work to fill her company’s production schedule.

At the same time, she said, new and threatened tariffs have cast uncertainty over Miller Mechanical’s work for several Canadian firms for which it fabricates machinery.
“It is a little bit disconcerting, but I hope that it all settles out soon,” Miller said.

Miller’s company is just one of many around the region that are having to adjust plans as the Trump administration’s new or threatened import taxes disrupt international trade patterns. The developing trade war is creating uncertainty across virtually every sector of the local economy.
In the Glens Falls area alone, those who are watching warily range from small-business owners to the executives of major manufacturing operations.

Becton Dickinson, a global company that operates a medical device plant in Queensbury, announced in its May 7 earnings report that because of the anticipated impact of tariffs, it has reduced its estimated profit by 25 cents per share, down from a previous estimate of $14.30 to $14.60 per share for the fiscal year ending in September.

Many other businesses in the region are still in a wait-and-see mode as they try to gauge the effect of tariffs that keep shifting in size and scope. In several instances President Trump has threatened, and then backed away from, huge tariffs against particular countries or regions including China, Canada, Mexico and the European Union.

But a 10 percent tariff on virtually all imported goods took effect in early April, and other tariffs in place as of May included a 25 percent import tax on foreign steel, aluminum and most automobiles as well as a tax of at least 30 percent on all goods from China.

The effective average tariff rate on all imported goods, which had been 2.5 percent in January, stood at 17.8 percent in mid-May, the highest rate since 1934, according to an analysis by The Budget Lab, a nonpartisan economic policy research center at Yale University.

 

Challenges — and opportunities?
Dylan Hewitt of South Glens Falls, who was a White House trade adviser in the Biden administration, said tariffs can be an effective tool in trade policy if used properly.
But he likened the new administration’s use of tariffs to swinging a two-by-four. You can pick up a board and start whacking at things and do a lot of damage, or you can take a pile of boards and build a structure, he explained.

“Not having a steady and clear plan, that is the challenge,” Hewitt said. “All of a sudden you wake up to an international trade war that is being escalated by a social media post.”

Trump has said his administration’s new tariffs are all part of a process to make global trade more equitable and to encourage companies to bring manufacturing operations back to the United States. The president and his supporters say his tariff policy, although it may result in temporary pain for businesses and consumers, will lead to long-term rewards.

Some suggest the turmoil could have an upside for certain businesses if they are positioned to capitalize on new opportunities as global buying patterns change.

“There are vast opportunities and challenges for the wide variety of manufacturing businesses — a turbulent time for sure, but eventually the dust will settle,” said Chuck Barton, executive director of Warren and Washington Counties Industrial Development Agency.

Kevin Stapleton, the assistant director of economic and labor information on Vermont Gov. Phil Scott’s new task force on tariffs, urged businesses to “be nimble.”

“New opportunities could arise because of tariffs,” he advised. “Be ready to take advantage of them.”

But Hewitt and other experts say the Trump administration’s erratic approach to implementing tariffs is making most companies reluctant to make new investments.

“That uncertainty doesn’t allow any company to plan out the project of the investment,” Hewitt said.

And for businesses that depend upon imported supplies, as well as those exporting to countries that have imposed retaliatory tariffs, the temporary pain is likely to linger for many months — or perhaps years.

PraxiChain, a national supply chain analysis and consulting firm, estimates ongoing trade disputes will last at least through the end of 2026. The firm is advising companies to add more contingencies to supply contracts, include risk-sharing language to offset unexpected price increases, and to keep less inventory.

 

Broad effects for farms, businesses
In the Hudson and Champlain valleys of New York and Vermont, industries that face particular challenges from tariffs include agriculture, paper, wood products, chemicals, printing, construction, machining, aerospace and semi-conductors.

Northern New York and Vermont are particularly vulnerable in the trade war because of their close proximity to Canada and a long history of cross-border trade, in many instances with companies having complementary operations on both sides of border.

Amanda Powers, a spokeswoman for the New York Farm Bureau, said many of her organization’s member farmers are concerned that major increases in tariffs will hurt their bottom line.

“Many New York farmers purchase equipment, feed and supplies from locations outside of the United States,” Powers said in a written statement. “For example, nearly all potash, a key ingredient in fertilizer, is imported from Canada.”

Powers said the Farm Bureau was glad to see some threatened tariffs being negotiated to lower levels. But as with business owners in many other industries, she suggested the president’s frequent changes in the size and targets of tariffs were making it difficult for farmers to plan.
“It is the day-to-day uncertainty that is causing the most anxiety in the agricultural community,” Powers said. “Rising and falling tariffs make it very difficult to plan or budget for expenses, and farmers already deal with razor-thin profit margins.”

New York’s agricultural exports decreased during the first Trump administration, and there is concern the decrease could be even greater in the current tariff situation, said Hewitt, the Biden administration trade adviser.

John Carr, owner of Adirondack Pub & Brewery in Lake George, said he’s monitoring the tariff situation closely, as the barley and malt he uses to make beer is imported from Quebec.
He buys on annual contracts, and so far, his suppliers have had grains already imported and stored in silos in New York. But he’s concerned about potential price hikes when he enters new contracts later this year.

Carr buys his corn and maple syrup from farms in Warren and Washington counties, so those supplies aren’t affected by the tariffs. He buys some products such as pint glasses and can tops from China, but he said lower shipping costs have partially offset some of the new tariffs.

“Canada’s really the one we’re primarily watching the most,” he said.

 

A risk to major industries?
The new and threatened tariffs are a big concern for the region’s paper industry, especially for goods coming from Canada.

“From turning wood chips into pulp, pulp into base stock, and then transforming that raw material into a product that is then packaged for distribution, our industry’s manufacturing process involves many stages that can happen at different facilities on both sides of the border,” said Heidi Brock, president and chief executive officer of The American Forest & Paper Association, an industry trade group.
Some U.S. paper mills rely on certain tree species that are more prevalent in Canada as the raw material to make high-quality paper, she said.

Sylvamo, which operates a large paper mill along Lake Champlain in Ticonderoga, said in its May 9 earnings report that tariffs are “one of the main risks” going forward, because tariffs likely will reduce demand for its products in the second half of the year.

“Some shifts … are already starting to materialize,” the company said.
Semi-conductor manufacturing has grown in the region, with companies such as GlobalFoundries in Saratoga County and Micron Technologies in Onondaga County, but Hewitt said companies in this industry now are reluctant to make additional investments because of the uncertainty about tariffs.

“We’re going to lose the competitive edge in this market,” he said.
GlobalFoundries has given no indication so far of delaying or cutting back on its planned expansion in Saratoga County, but there is a new reluctance on the part of economic development prospects in general to make investments, said J. Gregory Connors, president and chief executive officer of Saratoga Economic Development Corp.

“The conversation on the street, there’s a great deal of uncertainty,” he said.
Connors added that there is a ripple effect when a company does not invest in building a new plant or expanding an existing one, as the construction trades lose out on the work.
“I think the level of uncertainty extends to all sectors,” Connors said.

 

Expecting higher prices
Although significant tariffs have already taken effect, expected price increases for many items have yet to work their way through the supply chain.

So a number of businesses reported that, as of May, the uncertainty over tariffs had been more worrisome than the actual effects to date.

Matt Funiciello, owner of Rock Hill Bakehouse in Glens Falls, said he had so far been able to switch among flour suppliers to avoid any price increases from tariffs.
“At this moment the emotional, the fear they’re going to be an impact at some point, … is affecting us,” Funiciello said.

Todd Feigenbaum, of Feigenbaum Cleaners in Glens Falls, said he expected to face increased supply costs soon.

“A lot of our hangers and supplies, the plastic bags which we put over the garments, come from China,” Feigenbaum said. “It probably will have an impact. We’re just going to have to wait and see how the wholesalers pass along the costs.”

Glens Falls Hospital had not yet experienced increased costs for medical devices, pharmaceuticals or food and supplies, but The Albany Med Health System, to which the local hospital belongs, has established a task force to monitor the situation, said F. Raymond Agnew, a Glens Falls Hospital spokesman.

Tyler Herrick, president of Spruce Hospitality Group, which operates The Queensbury Hotel in downtown Glens Falls, among other local properties, said he had received emails from some suppliers warning that he should expect tariff-driven price increases at some point.
“We haven’t experienced them yet,” he said.

The biggest impact of the tariff situation so far may be a slowdown in economic development, trade experts said.

Early this year, even before tariffs had begun to take effect, Canadian investors had delayed or ruled out opening new operations or expanding existing ones in the United States, said Bill Owens, a lawyer and former Democratic congressman from Plattsburgh who now specializes in international trade.

That kind of cross-border investment has “largely come to a halt,” Owens said.

 

Canadians staying away
The region’s tourism industry also could take a hit this year because of Canadians angry about President Trump’s tariff threats and his discussion of annexing Canada.

Nearly half of Quebec residents who had planned to vacation in the United States this summer had changed their plans and would either vacation in Canada or some other nation, according to a February survey by the Association of the Tourism Industry of Quebec.

The Lake George region may not be as vulnerable as destinations in Clinton County, Lake Placid and northern Vermont that are closer to the border, said Meghan Seeley, spokeswoman for the Lake George Chamber of Commerce and Visitors and Convention Bureau.

“Here it’s been sort of anecdotal,” Seeley said. “It’s sort of sector by sector. Overall our website activity has gone down with some of our travel planning earlier in the year, but even that seems to be stabilizing as well.”

Owens said the grassroots Canadian boycott of U.S. tourism and products appears to have less to do with tariffs than with Trump’s repeated references to making Canada the 51st state of the United States.

“They view that as disrespectful of Canadian sovereignty,” Owens said. “They’re very angry about that.”

Herrick said The Queensbury Hotel started a social media campaign in February promoting the hotel as a destination for travelers from Manhattan to Montreal — and had to take it down because of the volume of angry comments from Canadians.

“That’s something that you don’t want to be seen by anyone,” he said.