On August 1, 2018

Businesses brace for tariff crunch

By Elizabeth Hewitt/ VTDigger

From dairy farms to newsrooms, Vermont businesses are bracing for a crunch from trade tensions between the United States and other countries caught up in a tariff tit-for-tat.

State officials say they do not yet have clear measures of how the escalation of tariffs between the United States and key trading partners are impacting the state’s economy. But industries are preparing for the worst, according to experts and businesspeople.

Vermont agriculture officials say that the tariffs other countries are imposing on American goods are likely to hit farmers in the state, including dairy farmers.

Agriculture Deputy Secretary Alyson Eastman said it’s too soon to chart the specific impact of other countries’ tariffs on dairy products on Vermont farms.

However, she anticipates that farmers in the state will receive some funds from the $12 billion bailout package announced by President Donald Trump last week. Details like who will get money, and how much they’ll get, remain unclear.

According to staff for Sen. Patrick Leahy, D-Vt., the USDA has said that they will not have details of the program until September.
Since Trump started talking about tariffs earlier this year, businesspeople in industries from construction to craft beer have said their costs are rising as a result.

All three members of Vermont’s delegation to Washington DC have spoken out against the measures. Rep. Peter Welch, D-Vt., called Trump’s rhetoric “extremely disruptive and destabilizing.”

Now trade figures are bearing out those fears.

The state’s three largest export markets happen to be countries that have put in place tariffs retaliating against the new steel and aluminum tariffs — Canada, China and Mexico.

Statistics from the Vermont Agency of Agriculture (AOA) show that exports to all three countries are down so far in 2018 compared to previous years.

Exports to China from Vermont hit a record high of $41.7 million in 2017. Year-to-date numbers show that trade to China is down by almost a quarter this year.

Trade to Canada, historically Vermont’s largest trading partner, has decreased as well. Through the first five months of 2018, trade was 19 percent lower than it was last year.

Exports are a significant market for Vermont farmers, according to Eastman, and some of the products that they sell in those markets are subject to new retaliatory tariffs.

For instance, two of the top products Vermont sells to China are whey and cheese. In retaliation to U.S. trade moves, China hiked tariffs on whey from 2 percent to 27 percent. The tariff on cheese went from 12 percent to 37 percent, according to the AOA.

Eastman said it is challenging to map the impact the tariffs are having on Vermont dairies because they are just one of several significant pressures facing dairy producers, such as a long-term trend of low milk prices.

The federal assistance package is likely to result in at least some Vermont farmers getting support, she said. But Eastman emphasized that the money is not a remedy for the problems facing the industry.

“This is not a long term fix for dairy,” Eastman said.

“Farmers would like to get paid an honest price for their product and not have to keep relying on subsidies and programs,” she said. “It would be well-received if they were to have some predictability in our system.”

Meanwhile, other industries — like the print news business — have already started to see the concrete impact of new tariffs imposed by the Trump administration

Among the first steps Trump took in the escalation of trade tensions with Canada was increasing tariffs on imports of lumber and uncoated groundwood paper. The result has been that newspapers around the country have been confronted with higher costs of newsprint — an added expense for an already cash-strapped industry.

Todd Smith, publisher of The Caledonian-Record, said that so far the printers the newspaper works with have managed to minimize the impacts of the new tariffs. However, he has noted relatively small price increases every month this year.

Smith said the paper’s “worst case financial scenario” would be if newsprint costs were to increase by 20 to 30 percent, as many news outlets around the country are expecting.They would likely consider reducing the amount of news they run in the paper.

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