Indiana manufacturers feel sting of US-China trade war

"American and Chinese flags" by futureatlas.com, CC BY 2.0

INDIANAPOLIS (AP) — The tit-for-tat economic dispute between the U.S. and China is hurting manufacturers in Indiana, the nation’s top manufacturing state.

The trade quarrel between the world’s two largest economies began in July 2018 when the U.S. imposed a tariff on certain Chinese imports. Since then, both countries have raised tariffs worth billions of dollars on each other’s imports.

Now, American businesses are caught in the crosshairs of the trade war, and the impact is especially pronounced in Indiana.

The state leads the country in manufacturing, which accounted for 28.6% of its gross state product in 2017, according to the National Association of Manufacturers. That year, 17% of Indiana’s jobs were manufacturing-related, also the nation’s highest, according to the manufacturing advocacy group based in Washington, D.C., citing data from the U.S. Bureau of Economic Analysis.

Carmel-based Telamon Corp. is now paying 30% more for some components it imports from China to make car parts, cell towers and fiber-optic cable networks. The company makes wiring harnesses for vehicles made by Ford, Honda, Toyota and Mercedes and produces infrastructure components for companies such as AT&T and Verizon.

Some of the extra cost has fallen on its customers, while the company was forced to absorb the remainder— cutting into its profit margin.

“That’s a big hit,” CEO Stanley Chen told the Indianapolis Business Journal. “We don’t have a lot of warm fuzzies that (the trade dispute) gets resolved in the near term. … We see risk long term to revenue.”

U.S. and China are expected to negotiate next month. Despite that, both countries either imposed or increased penalties on billions of dollars of goods earlier this month. President Donald Trump plans another increase Dec. 15, and China is ready to retaliate.

Meanwhile, engine maker Cummins Inc. in Columbus, Indiana, has been taxed by both countries. China is its largest foreign market and the company has facilities in China that use American products, making them subject to Chinese tariffs. The company also imports Chinese products to its U.S. facility, which come with the American tax tag.

The company reduced its estimated annual tariff impact to $100 million, from $150 million, by switching suppliers, passing along some costs to customers or sharing costs with suppliers, said Shannon Heider, Cummins’ director of international government relations.

Indianapolis attorney Matthew Levy said many companies viewed the trade war as governmental saber-rattling and didn’t take the threat seriously.

“A lot of our clients are beginning to realize that this problem is not going to go away,” Levy said.

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