Why one fairly economically resilient community has the tariff jitters

Yesterday we looked at the ridiculous gyrations the administration is putting itself through to shore up the ag sector in the wake of the damage done by tariffs.

How about power generation? Or construction?

The Washington Post takes a look at the case of Mike Pence's hometown, the generally economically robust city of Columbus, Indiana. A cross-section of folks there are mighty apprehensive:

According to the Brookings Institution, the Columbus area is the most export-reliant region in the country, with just over half of its economic output linked to foreign purchases.

“I’m very worried,” said Tom Linebarger, the chief executive of Cummins, who met with President Trump over dinner at the White House in January in a bid to dissuade him from introducing steel and aluminum tariffs or tearing up free-trade agreements.

Linebarger, 55, warns of job losses ahead because thousands of jobs at Cummins and elsewhere in the area depend on trade.

“We will do everything we can to mitigate . . . the impact to jobs,” he said. “It’s very clear, though, that we’re not going to be able to mitigate everything.”

Pence’s hometown oozes internationalism: 40 foreign companies have a presence, more than half of them Japanese engines and auto-parts plants, employing almost 10,000 people. The area’s schools collectively speak 51 languages. The city ranks second in the nation in the per capita percentage of H-1B visas for foreign workers. 

Cummins plants produced the drill that powered the famous rescue of Chilean miners in 2010 and the emergency generator at the Statue of Liberty.
Now the aggressive pursuit of foreign trade that made this city a recession-busting economic miracle has made it decidedly vulnerable, with businesses already canceling projects and mulling the depth of job losses.

The Cummins plants, which produce engines, generators and other equipment, epitomize how deeply international trade has become rooted in cities and towns throughout the nation. Cummins alone has 25,000 different suppliers and also its own chain of distribution, both of them largely international. Its U.S. base is bolstered by operations in the United Kingdom, China and India.

Linebarger said the president’s trade war hits the company in two ways, affecting both its incoming parts, which will be subject to tariffs, and its own products, on which retaliatory penalties will be assessed by countries targeted by Trump.

For Cummins, the two most corrosive tariffs will be those assessed on steel and aluminum, which began July 1 and cover $48 billion of imports, and the proposed $351 billion of automobile and auto part imports. Both have been justified as necessary for national security.

The vice president’s brother Ed ran what is now the most vulnerable of the company’s factories: the high-horsepower engine plant in Seymour, outside Columbus, which employs 1,000 people. Its biggest export is a 95-liter engine, which is the size of a car and can power hospitals and football stadiums. It is so specialized that only 10 can be made per week. Of these, eight will be sold abroad.

“We almost put the factory in India. We evaluated the U.K. and China too. If we’d seen trade barriers at that point, we’d definitely have made a different decision,” says Linebarger.

Folks who put up buildings are feeling it, too:

Other local businesses are seeing the effects as well. Harold Force, 67, has run a construction company founded by his father since 1980, which currently employs 250 people. Now he is coping with rising prices on items he needs for contracts signed in less expensive days before the trade war.

Already, he said, he has had to cancel plans to expand his workforce.

“I think this is a much bigger deal than people think. When it started, it was shock. I thought, ‘Is this really happening?’ Then one of our biggest projects in recent times was canceled because of steel prices,” he said.

“It’s damaging in so many ways,” he said. “Tariffs have put blood in the water.” 

And the Economic Development Board - the outfit that's been instrumental in giving the city its international flair - is nixing plans for an annual junket to the Pacific Rim:

Jason Hester of the Greater Columbus Economic Development Corporation has traveled to China for the last nine years to whip up investment. This year, he’s canceled his travel plans.

“There’s nothing we’re going to decide, so what would the point be?” he asked.

The shills love to tout the economic uplift from the tax-reform package (the credit for which actually goes to Congress), but there are now quite audible rumblings of portent of a markedly different nature.

Somebody needs to tell the Very Stable Genius this isn't making him look like a winner.