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Tariff trade war: Trailer makers caught in crossfire?

March 5, 2018
If President Trump follows through with planned tariffs on steel and aluminum, trailer manufacturers are concerned about a lack of domestic supply for the specialty materials the industry currently imports—and relies upon. They also question whether hurting existing industries to bring back a comparatively few jobs from overseas is sound policy.

Invoking a rarely used national security finding, President Trump on March 1 announced his intention to impose tariffs on the import of aluminum and steel—part the administration’s quest to bring manufacturing jobs back to the U.S. While many in the American steel and aluminum industries, along with Rust Belt Democrats in Congress, quickly expressed support for the plan, other domestic manufacturers—including various representatives of the trailer industry—and many Republicans in Congress have come out against it. Opponents cite unintended consequences, such an expensive trade war and resulting price increases for a wide range of products.

Trailer makers, in letters to the administration and representatives in Congress, say the tariff plan “pits one set of U.S. manufacturers against others” and that domestic producers simply cannot supply the specialty products used to make modern transportation equipment.

The decision to impose tariffs, initially announced as 25% on steel and 10% on aluminum, is based on a Feb. 16 report by the Department of Commerce which found that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security,” as defined by Section 232 of Trade Expansion Act of 1962.

Among the key findings:

  • The United States is the world’s largest importer of steel. U.S. imports are nearly four times exports.
  • On an average month, China produces nearly as much steel as the U.S. does in a year. For certain types of steel, such as for electrical transformers, only one U.S. producer remains.
  • Aluminum imports have risen to 90% of total demand for primary aluminum, up from 66% in 2012.
  • From 2013 to 2016 aluminum industry employment fell by 58%, 6 smelters shut down, and only two of the remaining 5 smelters are operating at capacity, even though demand has grown considerably.
  • Infrastructure, which is necessary for U.S. economic security, is a major use of aluminum, including use by virtually every transportation mode.

The report does recommend that a process be put in place to allow the commerce secretary to grant requests from U.S. companies to exclude specific products if the U.S. lacks sufficient domestic capacity or for national security considerations. And that’s the case the trailer industry hopes to make.

The Truck Trailer Manufacturers Association, in a Dec. 18, 2017 letter to Commerce Secretary Wilbur Ross—after the department initiated an investigation into aluminum sheet from China—pointed out that TTMA members “prefer to purchase their sheeting” from American producers.

“Our members are concerned, however, that there are certain specialty products—not the ‘common’ products properly in scope in this matter—that domestic producers cannot reliably and competitively supply,” the letter states.

TTMA outlines the various factors that go into the specification and manufacturing of heavy-duty commercial trailers, and the importance of specialty aluminum products such as seamless aluminum sheeting for trailer roofs.

“At present, TTMA members are aware of only one domestic manufacturer of rolled aluminum sheet in wide widths that are wide enough to provide for seamless roof construction on heavy-duty trailers,” the letter continues. “TTMA members are not aware of another supplier of comparable aluminum sheet products elsewhere in North or South America or in any other location worldwide, except for the People's Republic of China (PRC).”

The upshot: Imposing duties on such imports “would instantly create a sole-source, anti-competitive monopoly” for aluminum sheeting used on the vast majority of van trailers sold in the United States. Additionally, TTMA members can’t be certain that the single domestic supplier can currently produce sufficient quantities of aluminum sheeting in the required widths to manufacture the quantity of van trailers that their customers will order.

“Even if such production were theoretically possible, the entire U.S. trucking industry would be left only one natural disaster, labor action, plant fire, or simple production equipment failure away from having the majority of its new trailer production frozen,” the TTMA letter reads. “This cannot have been the Administration's intent in commencing these investigations into Chinese unfair practices involving common alloy sheets, i.e. those that can easily be replaced by the whole of the U.S. aluminum industry.”

The National Association of Trailer Manufacturers, which represents light- and medium-duty trailer makers and suppliers, makes a similar case in an “action letter” designed for members to use to inform and influence representatives in Congress. The letter, made available Feb. 8, cites the impact of sanctions on aluminum alloy such as the 3000 Series, used frequently by in enclosed cargo units, including horse and livestock trailers.

“Trailer manufacturers rely on aluminum sheet, particularly in wider widths, which can be difficult to source domestically,” the NATM letter states. “The recent investigation by the Department of Commerce could significantly jeopardize our industry. While the aluminum industry claims 3,700 workers are impacted by aluminum imports, DOC is failing to recognize the tens of thousands of trailer manufacturing jobs at stake. ”

And the topic was much discussed at NATM’s recent annual convention, where Darrell Conner of K&L Gates, the association’s government affairs counselor, outlined the procedures behind the tariff plan—and what members could do to protect the industry.

“There will be some right turns and some left turns along the way. I think now that the decision has been made the stakeholders will engage much more heavily—both through Congress, which can have an impact on it, as well directly with the administration, and through legal means,” Conner said. “There’s no question as to where President Trump stands on manufacturing. The question is how to balance what he wants to achieve in bringing it back here [to the U.S.] against what he’s going to do to hurt existing manufacturing. Part of this assessment is going to be where are the domestic manufacturers, are they going to want to do it, and if they are, what are the counter arguments?”

He likened the aluminum tariff plan to the Obama administration’s anti-dumping sanctions over Chinese tires, noting the trailer industry successfully lobbied for an exclusion of the “ST”-type specialty tires.

“This is a penalty for us buying from overseas where we have no choice,” added Rick Russell, Carry-On Trailers, chairman of NATM’s government affairs committee. “What’s going to happen to us is prices are going to go up and unfairly slow our economy, in my opinion, and affect our industry."

NATM Executive Director Kendra Ansley subsequently said the association was "disappointed" with the Trump administration's decision to move forward.

“We represent American manufacturers employing thousands of workers, and we certainly support efforts to create more U.S. opportunities for businesses,” she said. “But a 25% tariff on steel and a 10% tariff on aluminum will hurt manufacturing businesses like ours and many others, which we have been communicating to the Administration and Congress.  NATM will continue to work with allies in the industry and on Capitol Hill as the process continues. We hope that the Administration will work with us to craft solutions to this issue that will enable the steel and aluminum industries and the trailer manufacturing sectors to be successful.”

The National Trailer Dealers Association is also concerned about any tariff-related price rise.

“The tariffs are certainly concerning given other regulatory pressures that stand to add cost to each commercial vehicle produced,” NTDA President Gwendolyn Brown tells Trailer/Body Builders. “Any increase on raw materials used in production has a potential negative impact on sales.”

NTEA, trhe trade association of the work truck industry, voices similar concerns.

“While we cannot be certain of the effects of any such tariffs until we see final details, they would certainly increase the cost to produce many of the trucks, truck bodies and equipment our membership produces," said Steve Carey, Executive Director.. "Further, we worry about how any retaliatory trade actions might negatively affect the work truck industry.”