Trump Tariffs Squeeze New Jersey Manufacturers, Disrupt Supply Chain

John Reitmeyer | August 15, 2018 | Budget
The tariffs ‘have been pretty much a nightmare,’ one executive tells lawmakers, who want to help but are not able to do much to protect local industry

Credit: NJTV News
Manufacturing in NJ
Recently enacted federal tariffs on things like steel and aluminum are hitting the manufacturing industry in New Jersey hard, even though the state is not home to any of these plants. Local manufacturers that use steel and aluminum as raw materials in their products are now at a major disadvantage when competing against companies that aren’t subject to the tariffs. Indeed, even sourcing the materials has become a problem for some manufacturers as the tariffs have upset the supply chain.

The tariffs are being driven by President Donald Trump, with imported products such as steel and aluminum from places like China now subject to charges that are as high as 25 percent. The state has no direct control over the tariffs, but they are eating away at profits, threatening jobs and chilling expansion plans for many New Jersey manufacturing businesses.

Credit: NJTV News
The tariffs have been “a nightmare,” said Gary DuBoff, of Arrow Fasteners, a Saddle Brook company that makes staples and staplers.
“The tariffs, for us, have pretty much been a nightmare,” said Gary DuBoff, chief executive of Arrow Fasteners, a Saddle Brook company that manufactures staples and staplers. “At this point, we’re really not quite sure what to do,” he said.

Lawmakers have been holding hearings around the state to figure out ways to prop up New Jersey’s manufacturing industry, and yesterday they heard of the problem from businesses that are suffering.
The testimony from DuBoff and others who appeared before the Legislature’s bipartisan manufacturing caucus meeting in Metuchen yesterday drew strong remarks from several of the lawmakers on the panel. As the hearing continued, they discussed ways the state could help ease the blow, including by offering tax credits to offset the impact of the tariffs, or with some other form of tax relief.

“It is a problem, and it is jobs,” said Sen. Tony Bucco (R-Morris).

Denied federal exemptions

“New Jersey does have a responsibility to protect our manufacturers against the federal government,” said Sen. Vin Gopal (D-Monmouth).

Lawmakers organized the manufacturing panel last year as they began to consider ways to rejuvenate an industry that not too long ago employed half of New Jersey’s total workforce. In recent months, the group has looked closely at regulations and other policies related to the increasingly modern manufacturing industry, one that relies heavily on new technology and the availability of skilled labor. In fact, one product of the caucus meetings has been the drafting of a proposed bond issue that would raise $450 million to expand county vocational-technical high schools and similar programs offered by county colleges to help generate more skilled labor for manufacturers.

But the hot topic during yesterday’s discussion was the tariffs that Trump has imposed on products coming from overseas as part of a broader attempt to reset trade relations with countries across the globe. Perhaps the biggest impact on New Jersey’s manufacturing industry has been the tariffs on steel and aluminum, which went into effect in March.

DuBoff said his company, which has 350 employees, has competitors who have their products wholly manufactured in China, which means they are not subject to the tariffs when they are shipped here. But his New Jersey-based company uses steel from China while paying U.S. residents to do all the manufacturing. That means the tariffs have given his competitors a big advantage even though they don’t employ any U.S. residents.

Raw materials no longer available

The Legislature’s bipartisan manufacturing caucus met in Metuchen yesterday and discussed ways the state could help ease the impact of federal tariffs.
“Man, that sucks,” said Sen. Joseph Cryan (D-Union) as he listened to DuBoff explain how Arrow was also denied federal exemptions from the tariffs even though no one argued against the company’s application for them.

“It sounds like a pretty ridiculous process,” added Gopal, the leader of the manufacturing caucus.

Marcia Frieze, chief executive of Case Medical, which is based in South Hackensack, said her company is having problems just locating the raw materials that are needed to make its products, which are containers that are used in the medical industry. Many bigger companies have been hoarding whatever material is available in the United States, she said. “It’s simply not available here anymore,” Frieze said.

Gail Friedberg, senior vice president of Newark-based Zago Manufacturing, said the dilemma her company now faces is having to decide whether to raise prices on its customers or just continue to lose profits due to the impact of the tariffs.

‘…taxes by another name’

“From our perspective, tariffs are just taxes by another name,” Friedberg said. “These tariffs are creating a lot of uncertainty in our industry.”

While the lawmakers can play a direct role in reshaping state policies to better accommodate the changes that have been occurring in the manufacturing sector in New Jersey, they conceded yesterday that it’s harder for them to have an impact on Trump’s tariff policies as he’s tried to link the issue to national security.

Bucco is sponsoring legislation that would provide some relief to New Jersey manufacturing companies that buy steel and aluminum by offering them a credit on their state corporate-business taxes. “We are trying to do something about it,” he assured the business leaders who testified.

But others noted that New Jersey would ultimately take in less revenue if the state steps in to provide the manufacturers with tax credits, and the manufacturing executives said it would also use up their time and resources if they have to apply for tax credits.

$15 minimum wage is an issue

“It’s just not where we want our focus to be, (but) I think we all appreciate the thought,” Friedberg said.

Another way to help the industry would be to help ease the state’s overall cost of doing business, suggested Bucco’s son, Assemblyman Anthony M. Bucco (R-Morris).

“These manufacturers already face high property tax (and) increased corporate-business taxes,” Bucco said. “We continue to pile on at the state level.”

Also part of the conversation for manufacturers is the state’s consideration of a $15 minimum hourly wage, which is something Gov. Phil Murphy, a first-term Democrat, has staked out as a top priority. The current minimum wage in New Jersey is set well below that, at $8.60.

“We’re competing against (overseas) labor forces that are paying $1 an hour,” DuBoff said. “A $15 minimum wage in general would be a problem for us.”