One US manufacturer's mad rush north was prompted by looming tariffs

Stephen Bullock woke up to an urgent call from his Toronto-based distributor, who was concerned about what appeared to be a U.S. vs. Canada trade war.

In a few short weeks, two of the bulky contraptions Bullock's firm produces, used to lay curbs, highway barriers and sidewalks, were scheduled to be shipped to Canada. Could the 25,000-pound machines be loaded onto trucks today?

Bullock, the President of Power Curbers said, "They told me to get them here as quickly as I can." He scrambled that night to remove two machines from storage, which were destined for another buyer.

The panic about possible tit-for -tat tariffs had passed by then, but the trucks still carrying $350,000 machines rolled 700 miles or more north.

After announcing a reprieve of the same magnitude for Mexico, President Donald Trump put on hold the 25% tariffs against Canada just 48 hours after he announced them. Canada vowed to respond with its own tariffs on a range of U.S. products, including orange juice trucks. Bullock's sales team was worried that his machines could be caught in the cross border spat.

This kind of factory turmoil shows how tariffs can quickly ricochet throughout economies in unpredictable, and often expensive ways.

Canada is the largest U.S. destination for exports, accounting for roughly 35% of all goods exported by the United States, which totaled just over $2.1 trillion. According to the U.S. Census Bureau, exports to our two neighboring countries totaled $683.4 billion.

Trump has praised tariffs on his campaign trail and during his first weeks as president for their ability to boost the domestic economy and the U.S. Treasury.

Some manufacturers do love them. In a short statement issued by Nucor, the CEO of America's largest steelmaker, Leon Topalian praised Trump tariff plans. The new tariffs would have temporarily pushed up steel prices.

Many other business leaders, such as the U.S. Chamber of Commerce, and groups like the National Association of Manufacturers said that tariffs on goods coming from Mexico and Canada, which are part of a tight-knit North American distribution chain, would hurt domestic producers. Even companies who sell a lot of "Made in the USA", goods often depend on Canadian or Mexican suppliers for their parts, or even produce some finished products there that they then sell in the U.S.

Deal with it

Retaliation is one of the biggest risks. The U.S. usually imposes tariffs on imports, and the countries that are targeted respond with their own fees.

Last Sunday, President Trump admitted that his tariffs could cause "short term" pain to Americans. Global markets were concerned they might slow down growth and increase inflation. Economists say a recent surge in prices may slow down the Federal Reserve's efforts to reduce interest rates.

Kip Eideberg is the senior vice president of Government Relations at the Association of Equipment Manufacturers. He noted that 30% of the U.S. equipment - from tractors and bulldozers to sandblasters - are exported. Canada is the largest market for these companies.

He said that equipment manufacturers are moving their products to Canada to avoid tariffs. This was in reference to both the U.S. tariffs as well as expected retaliation. If a longer-term agreement or another reprieve cannot be reached, the levies may return in one month.

Eideberg stated that while the auto industry is a major focus, it is not uncommon for parts and materials to cross the border of North America five times during the production process.

Even though they are aware that they could be affected, some domestic producers have resigned themselves to the uncertainty of tariff threats. Caterpillar CEO Jim Umpleby told investors late in January that the company has been around for a century and has seen many administrations have different attitudes towards tariffs.

Jochen Zeitz (CEO of Harley Davidson) struck a similar note in a recent investor call, noting that their manufacturing is concentrated in America and that even the sourcing of their parts is "U.S. centric." Motorcycles are on Canada's list of products that will be subject to retaliatory duties.

CLOUDING THE AREA

Customers are increasingly looking for ways to reduce their exposure. This is causing some companies to see gains before tariffs are even implemented. Kaysun in Manitowoc in Wisconsin is a small manufacturer of high-tech parts for medical, industrial and automotive products, as well as consumer goods. They have seen an increase in interest from customers looking to purchase American.

Ben Harrison, CEO of the company, told me that a company visited him two weeks ago. The company currently manufactures parts in Mexico and Asia. He said that the company was looking to import products from these countries due to higher prices. This week, tariffs were raised by 10% for U.S. imports of products from China. The country has not yet reached an agreement with the U.S. to delay these taxes.

Bullock, the CEO of Power Curbers said that he is continuing to plan tariffs for more countries and regions. This includes the European Union, a major market for his machines. The company exports its products to more than 100 countries. It employs 125 people. Canada is the company's largest market abroad.

He said he would like to send more goods north, but the assembly line was constrained by parts availability and the need for extra workers. He said he would need to adjust production schedules in order to get more goods into Canada.

This year was looking good until recently. Bullock projected that business would grow by 10% in 2025, and planned to increase production in April through the hiring of an extra half dozen employees.

Tariffs cast a shadow over that. He said that he could not make a long-term commitment until he saw how the situation played out.

(source: Reuters)