Trump administration’s trade war worries WNC businesses

Somewhere in a dark and refrigerated warehouse on the West Coast are apples. Hundreds of thousands of them, they were originally intended for shipping to distant shores: foreign markets such as Mexico, China and India.

Due to retaliatory tariffs by these countries on American apples, however, growers on the West Coast may be looking to offload these apples closer to home. Soon, the fruit might be on its way to North Carolina, dragging down market prices for Henderson County apple farmers — and creating unintended casualties in the federal government’s ongoing trade war.

In January, President Donald Trump fulfilled what had been a major campaign promise by announcing tariffs on solar panels and washing machines. Later in the year, he imposed tariffs on steel and aluminum, launching what the Chinese government has called “the biggest trade war in economic history.” Trump’s administration claimed that the measures were necessary to protect American workers and ensure national security for key industrial inputs.

Shortly after these announcements, the targeted countries unleashed a host of tariffs of their own in retaliation. And, while Trump has tweeted that “trade wars are good, and easy to win,” Western North Carolina’s businesses are less bullish about the economic conflict. Owners of iconic regional enterprises, from apple orchards to craft breweries to the Moog synthesizer factory, feel anxious over what they see as market uncertainty and rising input costs.

Apples vs. apples

North Carolina is the seventh-largest apple-producing state in America, and apples from Henderson County account for 85 percent of those grown in the state. Although the region’s production mostly stays close to home — Kenny Barnwell, a fifth-generation apple farmer in Hendersonville and president of the North Carolina Apple Growers Association, says the target market for the majority of the county’s apples is within 90 miles — tariffs could still take their toll on area farmers.

Barnwell explains that many West Coast orchards usually export their fruit overseas. But with Mexico, China and India imposing retaliatory tariffs on American apples of 20, 15, and 80 percent, respectively, many of those orchards may now flood the domestic market.

“There is a huge amount of apples in storage out West,” Barnwell says, “and they will try to do something to recoup their money. And so they will dump them on our market, at some price.”

The Trump administration’s own tariffs on European, Canadian and Mexican steel and aluminum, set respectively at 25 and 10 percent, may threaten Henderson County’s apple industry as well. “Everything we use to farm with is made out of steel or aluminum. All of these prices are going up, and they’ll trickle right on down to everything else you use,” Barnwell says.

Kick the can

Increased metal prices are also of concern to the area’s thriving craft beer industry. In a statement released in March, the North Carolina Craft Brewers Guild wrote that “the administration’s proposed aluminum and steel tariffs threaten existing jobs in North Carolina’s craft brewing industry and may put a freeze on planned expansions that would add new jobs in the state.”

Leah Wong Ashburn, president and CEO of Highland Brewing, says that she’s seen price increases of 25 percent on brewing equipment in the last three months. While she hopes that the additional costs won’t impact how much consumers pay for beer, she admits that the reality of business may make a price hike inevitable.

“It’s not at that point,” Ashburn says. “But if it continues, there might not be any choice. At some point, there is no choice.”

The impacts of the tariffs on the aluminum cans used to hold that beer are currently less certain. Both Ashburne and Jim Birch, vice president of operations at Catabwa Brewing Co., say they haven’t seen any aluminum price increases, which Birch believes may be due to the size and scale of their operations. “I think some of the smaller guys might get squeezed a little bit”, he says.

Republican Rep. Patrick McHenry, a member of the House Small Brewers Caucus whose district includes Asheville, has moved to address his constituents’ concerns. On July 18, he joined representatives from both sides of the aisle in sending a letter to Trump requesting that specific types of aluminum be excluded from the tariffs.

“Primary aluminum used in can sheet is not widely available in the United States”, the letter explains. “As a result, primary aluminum made into rolled can sheets must be sourced from outside the United States, and American companies that use these products depend on these imports.”

Making it work?

Regional manufacturers of more durable goods have their own worries about the trade war. Moog Music, which makes synthesizers and other electronic instruments at its downtown Asheville factory, has warned that a 25 percent tariff on Chinese circuit boards and other components could force the company to lay off workers or relocate overseas.

In a form letter Moog encouraged fans to send to North Carolina’s congressional delegation, the employee-owned business states that it sources as many parts as possible from the U.S., often paying up to 30 percent more than if it had sourced the same parts from abroad. “However, whether [the company buys] circuit boards in the U.S. or overseas, the majority of the raw components still come from China,” the letter continues. “Therefore, Moog will be unable to avoid this substantial cost increase because of the tariffs.”

Moog is joined in its anxiety by other advanced manufacturers throughout WNC, such as GF Linamar, GE Aviation and BorgWarner TurboSystems, which have been transforming the regional economy through heavy investment in infrastructure and hiring. Corey Atkins, vice president of public policy for the Asheville Chamber of Commerce, notes that these firms’ reliance on steel and aluminum makes them susceptible to trade tensions.

Atkins points to Linamar, a Canadian auto parts manufacturer, as particularly vulnerable. The company, which currently employs over 300 people in Arden and Mills River and had planned to create up to 1,000 jobs by 2022, has called the potential impact of steel and aluminum tariffs “unbearable” in an email with Bloomberg.

“Prices will have to be dramatically increased to consumers, consumers will stop buying and we will have a collapse in the automotive market,” wrote Linamar CEO Linda Hasenfratz. “Clearly, this will lead to wide-scale layoffs, further decreasing demand for absolutely everything and spinning the U.S. into a deep, deep recession and dragging the rest of us down with them.”

Even Republican Rep. Mark Meadows, who represents the majority of WNC outside of Asheville and chairs the House Freedom Caucus, has expressed his skepticism of the tariffs. “The Commerce Department’s recommendation to impose tariffs ignores history — and it ignores the reality that U.S. manufacturing will ultimately be the loser with these protectionist policies,” he wrote in a March 1 tweet.  

However, Meadows stops short of directly criticizing the president. In comments to Xpress, his office writes that “we’re very supportive of the administration’s efforts to reach a better deal for American workers, and we’re very confident the end result will be a benefit to the U.S.”

But until that end result arrives, WNC’s businesses must wrestle with uncertainty and concerns about the future of their industries. “The longer [the tariffs] stay in place, there could be a ripple effect down the line that we won’t see for months, or even years,” Atkins says. “I just hate to think that while things are going so well we would do anything to slow our growth and our trend upwards as far as our economy goes.”