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The first layoffs from Trump's tariffs are here
[WASHINGTON] The first casualties of US President Donald Trump's trade war are 60 workers at Mid-Continent Nail, America's largest nail manufacturer. They lost their jobs on June 15 at a factory in a part of Missouri that voted overwhelmingly for Trump. The whole company could be out of business by Labor Day.
This is a potential game changer in Mr Trump's trade strategy, especially if it marks the start of more companies announcing layoffs. On Monday (June 25), Harley-Davidson said it will be moving some "production" offshore because of the trade war (Europe hit Harley with a 31 per cent tariff in response to Trump's steel tariffs on Europe). Harley won't confirm if jobs are leaving the United States, but the union representing many Harley workers, the International Association of Machinists and Aerospace Workers, is worried.
The Trump administration has argued that these tariffs will save jobs and that the cost to America will be minor. But now there are real job losses. Now there is a human face on the pain that so many trade experts have been warning about.
The political pressure on Mr Trump to stop the tariffs (especially on America's allies) is likely to escalate. In Missouri, a state with a close US Senate race, the layoffs are already becoming a hot election issue. Senator Claire McCaskill, D-Mo., is planning a rally by the nail plant on Friday.
Mid-Continent Nail blames the layoffs on Mr Trump's tariffs and the company says all 500 employees could lose their jobs by Labor Day. The next round of cuts could come in a matter of days.
The trouble for the company started at the end of May when Mr Trump put a hefty 25 per cent tariff on steel imports from Mexico and Canada. Mid-Continent had been importing steel from Mexico that American workers would then turn into nails.
After the tariff, the company was forced to hike its prices and customers fled. Orders are a mere 30 per cent of what they were a year ago, said George Skarich, the vice president of sales. He suspects many customers are now buying Chinese nails.
"There's a lot of uncertainty and a ton of fear in Poplar Bluff," said Mr Skarich. He voted for Mr Trump and says he's "disappointed" and "sad" at what's happening to a town and company he loves.
If Mr Skarich had a minute with Mr Trump, he says he'd tell him these tariffs aren't hurting China, they are hurting Missouri. The workers who lost their jobs on June 15 were contract workers paid about US$10 an hour, but the next round of layoffs will hit longtime employees, many of whom are making US$13 to US$14 an hour plus benefits. That's a middle-class job in Poplar Bluff where the median income is just over US$31,000 a year.
Mr Trump campaigned on "jobs, jobs, jobs." He promised to be the "greatest jobs producer God ever created." He and his team regularly argue that the tariffs are going to save jobs and even bring jobs back from overseas. But the vast majority of economists and business leaders have warned that many more jobs are likely to be lost than saved.
The Tax Foundation predicts 48,585 job losses from the tariffs Mr Trump has already enacted on imports of washing machines, solar panels, steel, aluminum and US$50 billion in Chinese products. That figure would soar to over 250,000 job losses if Mr Trump moves forward with tariffs on another US$200 billion of Chinese products, the Tax Foundation said.
Predicting the outcome of a trade war is difficult. The overall US economy is unlikely to fall into a recession because of this, most economists say, but it's likely to curtail growth a bit as companies hold off on hiring more workers or building new factories. And some parts of the country are likely to be hard hit. Europe, Canada, Turkey and China are targeting their tariffs at towns that voted for Mr Trump.
Supporters of Mr Trump's tariffs point out that the protectionist moves have yielded job gains. Nearly 4,700 American jobs have been created since the steel and aluminum tariffs went into effect as businesses like US Steel restart blast furnaces for in Illinois, and Century Aluminum reopened an aluminum smelter in Kentucky. Many of these positions are union jobs that come with US$60,000 salaries and benefits.
"Idled steel and aluminum capacity is being restarted as we sit here," said Commerce Secretary Wilbur Ross at a Senate hearing last week.
But the situation in Missouri is a warning sign of how the tariffs are helping some workers and harming others, and that's tricky politics for Mr Trump who looks like he is picking winners and losers.
Workers in New Madrid County, Missouri are celebrating as Magnitude 7 Metals is restarting an aluminum product line, giving 450 workers back their jobs. But just an hour away in Poplar Bluff, 500 workers could be out of a job by the end of the summer.
The president's focus has been on saving jobs that make raw steel and aluminum, but there are many more jobs that are harmed by the tariffs because they turn raw metal into something else like a car or airplane. The longer the tariffs are in place, the more companies are likely to have to make cuts.
Experts have warned Mr Trump that the tariffs are likely to cause more job losses than jobs saved, and the early signs of that are starting to play out in small towns south of St Louis As the job losses mount, so may the pressure on Mr Trump.