How U.S. tariffs are hurting New York farms and businesses

Edged between cornfields in the largely rural community of Marathon, a company with millions of dollars invested in high-tech cutting and forming machines produces components for some of America’s largest manufacturers.

Square Deal Machining in Cortland County makes steel enclosures for military electronics, screws for aerospace and metal pieces for one of the nation’s foremost tent makers.

Business has rarely been better, but the company has concerns over the ongoing U.S. tariffs with China and other foreign nations.

New York suppliers, farmers and manufacturers have dealt with the impact of the trade wars that are infringing on sales of crops, steel and other products made in the state and exported across the globe.

The tariffs, and the retaliatory ones by other countries, play an outsized role in New York, which is a top producer of many agricultural products and one of the largest manufacturing states in the nation.

There is hope that the tariffs will be eased after President Donald Trump announced on Dec. 1 a framework agreement with China to limit tariffs next year.

But the current tariffs, only a few months old, already have slowed down sales, some companies said, or led to higher prices for steel.

“As soon as they started talking tariffs, the imports slowed down,” said Joseph Morgan, Square Deal's chief executive.

“All the jobs we bid on last year we were losing money on. It was one of our busiest years with some of our lowest margins.”

Battle among countries

In September, the Trump administration levied a 10 percent tariff on $200 billion in Chinese products. The tariff was set to jump to 25 percent on Jan. 1 as Trump pressed for a better trade deal with the country.

Trump has maintained that the tariffs would force China into a more balanced trade agreement, and he and China President Xi Jinping earlier this month seemed to strike a potential accord.

Trump said that on Jan. 1 he would leave the tariff at 10 percent, while China would agree to purchase a "very substantial" amount of agricultural, energy, industrial and other products from the U.S.

"It’s an incredible deal. It goes down, certainly — if it happens, it goes down as one of the largest deals ever made," Trump told reporters Dec. 1.

"It’s a deal between the United States and China made by the President and the President. And it’ll have an incredibly positive impact on farming, meaning agriculture, industrial products, computers — every type of product."

New York businesses said that they are cautiously optimistic.

"If they agreed, then clearly that will help us," said Tim McMorris, general manager of Marco Manufacturing, an electronics company in Poughkeepsie.

"We were expecting a 25 percent tariff on a lot of the parts we import to build our printed circuit boards, so that's a good thing if in fact they are going to delay that or hopefully remove it all together," he added.

Reaction in New York

Trump's stance comes after he brokered a new North American Free Trade Agreement on Oct. 1 that is likely to help the struggling dairy industry by loosening trade restrictions.

The deal was signed Nov. 30, and Rep. Chris Collins, R-Clarence, Erie County, said it would correct the "unfair playing field" created by Canada's dairy pricing that limited sales from New York.

“President Trump promised better trade deals and he has delivered, replacing NAFTA which has caused our region to hemorrhage good paying manufacturing jobs for some time now,” Collins said in a statement.

On Wednesday, Congress passed a Farm Bill that is aimed at helping farmers. The measure, which heads to Trump's desk, was hailed by the state Farm Bureau, saying the bill will improve dairy safety, legalizes industrial hemp and aids research and support programs.

"Farmers needed stronger risk management tools in place moving into next year where there are signs that the economic stress will continue in the farming community," David Fisher, the group's president, said in a statement.

But in Trump's home state, the tariffs have hurt some industries, some companies said.

Prices for soybeans dropped nearly $2 per bushel since the tariffs were announced back in May.

For farmers like Seth Pritchard, whose 800-acre Canandaigua farm produces an average of 36,000 bushels of soybeans a year, that’s a big loss.

China buys about 60 percent of U.S. soybeans.

“The tariffs impacted us significantly,” he said.

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Helping farmers

To mitigate the impact the tariffs are having on farmers, the Trump administration in July announced an up to $12 billion market facilitation program.

The program offers soybean growers up to $1.65 per bushel on 50 percent of their total yield, or up to $125,000.

For Pritchard, who exports nearly 90 percent of his product overseas, the program doesn’t go far enough.

“There’s a lot of confusion about what’s going to happen with the aid and how it’s implemented,” Pritchard said.

Pritchard just completed harvesting 45,000 bushels of soybeans, what he believes to be his best yield on the crop ever.

And since the recent trade talks, prices on the crop increased 15 cents, he said.

"It came at a good time," Pritchard said of the recent trade talks between the United States and China. 

"So far it looks like it's been positive that he's (Trump) talking to the president of China," he said. 

"Any talks they can have, as long as they're positive, will help us really, I think." 

The tariffs come at a difficult time for farmers in New York.

There are already about 900 fewer farms in the state than there were a decade ago, down from 36,400 to 35,500, according to the U.S. Department of Agriculture.

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Uncertainty continues

New York officials said it's too soon to know whether any tariff changes with China will materialize and whether it will help New York companies and farms.

"As we understand it, the details of the new proposed trade agreement with China are not final," Jola Szubielski, spokeswoman for the state Department of Agriculture and Markets, said in a statement.

"New York farmers continue to face tariffs from the state’s three largest trading partners — Mexico, Canada and China. This is compounding an already difficult marketplace and putting additional pressure on New York’s farmers."

Szubielski said that even if the tariffs were scaled back, "Once these long-established markets are lost to the New York agricultural industry, it could be extremely difficult to regain that footing."

It's unclear whether the meeting between Trump and Xi will yield long-term results, said Andrew Novakovic, director of Land Grant Programs of the Charles H. Dyson School of Applied Economics and Management at Cornell University.

"I think all those two accomplished was they put a hold on punching at each other for a while with some kind of vague assurance that they would reconsider where they're at," he said.

"I don't see any way that the Chinese are going to stop doing something without the U.S. reciprocating in some way."

Companies under pressure

Businesses across New York said the impact of the tariffs vary.

In the Southern Tier, BAE Systems said it has concerns about any aluminum or steel tariffs, but said it also has to abide by federal laws that specify its requirements for materials.

"We are watching how the market responds to the tariffs as it does have an impact on us; however, as part of a larger defense company, there is not as much of an impact for us as in other industries," BAE said in a statement.

Mike Young, chief operating officer at Klein Steel in Rochester, said the price of steel has increased this year, but "our demand is still fairly solid.”

Klein Steel moves 400 tons of steel a day, putting the company just outside the top 100 service centers in the country, Young said.

Though the markets have stabilized due to supply and demand, the tariffs have created a volatile market for the steel industry.

Prior to the tariffs, Klein Steel could honor an estimate for up to 30 days. Now, the company, in some cases, has struggled to honor a price for 48 hours.

Despite the uncertainty, Young hopes the Trump administration has the resolve to see the tariffs through.

“I think there are foreign countries that manipulate their currency and sell their steel cheaper into our country than they would their own country, and that’s not healthy,” he said.

“If the tariffs accomplish the end goal for them, which is to keep governments from manipulating their currency against our currency, I think it’s a worthwhile battle.”

JSpector@Gannett.com

CArnold@Gannett.com

JPlatsky@Gannett.com