Kenneth Young, president of Tymco, a Waco-based company that builds street sweepers for clients around the world, has spent much of the past three days calling materials suppliers, picking their brains about tariffs President Donald Trump has proposed on steel and aluminum imports.
At M. Lipsitz & Co., a buyer and seller of scrap for more than 100 years, heavy machinery continues to churn tons of metal for sale and recycling.
Steel prices already are surging, possibly because of chatter in the industry ahead of Trump’s final decision on imposing the levies. Opposition has surfaced on several fronts, including from within Trump’s own party and cabinet.
Trump’s stated goal for imposing a 25 percent tariff on steel and a 10 percent tariff on aluminum is improving market conditions for steelworkers in this country, protecting or creating jobs by ensuring a competitive playing field. But critics worry about retaliation and higher prices for U.S. consumers on appliances, vehicles and even gasoline at the pump, as oil companies possibly pay more to build pipelines and refining facilities.
The Trade Partnership, a consulting firm that tracks international trade, has determined the tariffs could create a net loss of 146,000 jobs in the United States, according to a report in Business Insider magazine.
Not operating in a vacuum, Young said Tymco would have to pass along increased costs, “but certainly not anything approaching 25 percent.”
John Embry, president and owner of Pioneer Steel and Pipe Co., said his company has operated locally about 75 years, selling steel to large contractors, ranchers wanting to build barns or fences, and to homeowners planning to erect metal sheds. High-profile companies with accounts at Pioneer include SpaceX, which operates a rocket-testing facility in McGregor, and New York-based L3 Technologies, which modifies military and commercial aircraft at its Waco facility that employs about 1,200 people.
“We try to get as much American-made steel as possible, but there are times we need to reach outside the country. Mexico is a good option,” Embry said.
He said he has already has seen a 7 to 10 percent jump in prices the past 30 days.
“I look for prices to go up even more before Trump makes a final decision,” Embry said. “If he says, ‘Hey, I’m going to implement the tariffs,’ they may go really high. If he reaches a compromise at some point, the price increases may slow a little, but all the steel companies are going to use this opportunity, and the market volatility, to make as much money as they can.”
L3 Technologies, Waco’s largest industrial employer, referred comment on the issue of tariffs to the Aerospace Industries Association, a trade organization.
“Anything that is going to disrupt the global supply chain that our industry accesses and potentially raise costs creates a great deal of concern,” Remy Nathan, vice president of international affairs at the association, wrote in a statement.
In an interview with CNBC, association President and CEO Eric Fanning said the tariff proposal “is going to impact companies big and small in the aerospace and defense world. More importantly, we’re concerned about retaliation. The aerospace and defense industry generates the largest net surplus in the manufacturing sector — over $86 billion a year. These companies thrive on the exports of their products.”
Karr Ingham, an Amarillo-based economist who prepares a monthly report on Greater Waco economic trends, said he believes the proposed tariffs “would create impacts directly noticeable to Waco consumers,” including price increases for appliances and vehicles.
“Without breaking a sweat, I can think of 5,000 or so jobs in the Waco area that would be impacted,” Ingham said. “Do I think for a second they will all go away? Heavens no. But I think the imposition of tariffs could prevent future addition of positions, make expansion more difficult.”
Operations that involve metal fabricating, commercial building construction, manufacturing, utility and roadway construction, and metal coating or processing could feel the pinch, Ingham said.
At Waco Metal Finishes, owner Bo Johnson said he applies an aluminum oxide coating to metals “to create a more durable and corrosion-resistant surface.”
“We’re not an actual purchaser of steel or aluminum, but on a macroeconomic level, any time the cost of inputs goes up, some consideration must be given to cutting back on volume,” Johnson said. “One of our customers is SpaceX, and they’re not going to quit making rockets because the price of aluminum goes up. But if it were to go up significantly, they might consider other materials, some of which we may not be able to coat.”
M. Lipsitz & Co., a longtime Waco company that specializes in scrap metal recycling and has grown to 15 locations in Texas and Oklahoma, continues to play the waiting game on the issue of tariffs, said Charles Johnson, who serves as chief operations officer and marketing director.
“The jury is out on whether this will hurt or help us,” Johnson said. “In the short term, steel prices likely will rise, as will the price of scrap. But countries may choose to retaliate against the tariffs. Turkey, for example, has strong demand for scrap metal and often acquires it from the United States but also deals with Europe and the Baltic states. The tariffs may prompt Turkey to exclusively seek these alternatives, which would hurt our scrap prices.”
He said the international reaction is his primary concern.
“I certainly understand concern on the part of the steel industry,” he said. “The market is not a level playing field. Some countries nationalize the steel industry because they are more concerned about keeping people employed than making a profit, and their prices reflect that.”
Stephen Gardner, a Baylor University professor who specializes in global economies, said tariffs would hurl a curveball at U.S. companies that have designed their supply chains around treaties negotiated in good faith, including the North American Free Trade Agreement.
“I think it would be very damaging to overall employment in the U.S. if these tariffs are, in fact, implemented broadly, without making exceptions for even our closest allies,” Gardner said.
Central Texas Iron Works, which ships tons of fabricated structural steel for use in the petrochemical and refining industries, finds itself in a “stay-tuned mode,” Vice President Curtis Cleveland said.
“Our industry is sitting on the edge of its chairs,” Cleveland said. “Major fabricators such as CTIW get 95 percent of their steel from U.S. sources, so a tariff only on raw material would not impact us at all. If tariffs apply to finished products, then we would need a definition of finished product.”
He said the finished product definition is important for the industry as a whole, not necessarily Central Texas Iron Works, which uses U.S.-made steel and has enough work on the Texas Gulf Coast “probably to last us another 10 years.” Its Gulf Coast work means it is not likely to be fabricating steel for export.
K. Paul Holt, executive director of the Waco office of the Associated General Contractors of America, said the proposed tariffs would have “significant impact” on the industry, and not in a good way.
“Private companies going up with hotels, shopping centers, things like that, can adjust the scope of their spending,” Holt said. “But what about bond issues for schools and bidding for those jobs? Money allocated for those projects can’t be adjusted upward. You just get less school for the money.”
U.S. Rep. Bill Flores, R-Bryan, whose district includes Waco, warned against overly broad tariffs.
“As the president works to address the unfair practices of trading partners like China, we need to avoid placing blanket tariffs on steel and aluminum,” Flores wrote in an email to the Tribune-Herald. “Such actions could place undue harm on consumers and American businesses, including those in the 17th Congressional District, that rely on these materials. I have written the president to recommend that he consider targeted and measured approaches to deal with unfair trading partners rather than broad tariffs.”
Officials with Caterpillar, which makes an array of construction and earth-moving equipment for use worldwide and has manufacturing plants and warehousing units in Waco, declined to comment on the proposed tariffs.