How the Trump tariff war is already affecting Charlotte’s economy
Drew Medlin sees the impact of the trade war in the falling prices for his Union County soybeans.
Glenn Sherrill sees it in the skyrocketing prices for the steel that’s building Charlotte’s skyline.
And Todd Ford sees it in the rising cost of aluminum cans at his Charlotte brewery.
They are part of the collateral damage already being felt around the Charlotte region from President Donald Trump’s burgeoning trade war.
That fight escalated this month with tariffs on $34 billion worth of Chinese-made goods while China enacted tariffs of its own. Earlier, Canada and the European Union retaliated against Trump’s tariffs on steel, aluminum, motor vehicles and hundreds of other items. More tariffs are in the pipeline.
The U.S. Chamber of Commerce says $1.1 billion in North Carolina exports are threatened by a trade war, including a half-billion dollars worth of exports to Canada and $350 million to China.
Tariffs are impacting not only businesses, builders and growers but consumers who will see higher prices for things like appliances, cars and houses. Multimillion-dollar projects are in danger of being postponed or canceled.
In Union County, Medlin, 34, is dealing with the impact on the 3,500-acre farm he runs with his father.
“It’s a dark cloud, and it doesn’t go away,” said Medlin. He said he’s seen soybean prices fall about $2 per bushel in recent months over concerns about potential tariffs from China, a major importer of U.S. soybeans.
“I’m hoping that we can at least make it the next couple of years and try to weather the storm, and maybe something positive will come out of it,” he said. “That’s all you can hope for.”
Winners and losers
The tariffs are creating winners as well as losers.
Nucor, a Charlotte-based steel manufacturer, is benefiting from higher prices for U.S. steel in the wake of 25 percent tariffs on steel imports.
“Nucor supports the government’s efforts to stop the flood of illegally subsidized and dumped steel imports into the U.S.,” CEO John Ferriola said in a statement. “Tariffs send a strong message that dumping artificially cheap steel products into our market will no longer be tolerated.”
Mark Vitner, senior economist for Wells Fargo Securities in Charlotte, said steel producers like Nucor will benefit as prices rise and they are able to win back market share lost to overseas producers.
“The timber and lumber industries are also benefiting and we have seen increased investment in lumber yards throughout the Carolinas,” he said. “Of course higher prices for steel and lumber mean that it is more expensive to purchase things made with them.”
At least in the short run, tariffs are boosting sales of domestic vehicles by raising the prices of imports.
“My phone has been ringing off the hook with people who want to buy cars now,” said dealer Felix Sabates, who sells Fords as well as Mercedes-Benz autos. He said he’s seen a dramatic increase in sales recently as customers attempt to buy vehicles before prices go up.
But Sherrill, chairman and CEO of SteelFab, a Charlotte steel fabricator, has seen the cost of his raw product jump by as much as 50 percent.
“There’s very little foreign steel coming into markets now because of tariffs,” he said “It’s allowed domestic mills to hike prices... I certainly am worried that if the tariff program stays in place it’s going to impact commercial construction.”
Rich Cerretti, Charlotte-based vice president of JE Dunn Construction, is concerned about that too.
“The Charlotte office has four to five projects in the pipeline,” he said. “I really worry that those will be... delayed or stopped.”
A holding pattern
In Union County, Medlin said the drop in soybean prices has led him to sideline equipment purchases and hiring. The beans are the largest and most profitable crop grown at the approximately 65-year-old farm, which employs four other people.
The price decline comes as farmers were already coping with a six-year-long drop in soybean prices, Medlin said, adding that it’s tough to make a profit at the current prices.
“Right now it’s just a holding pattern,” said Medlin. “We hope that right now we’re at a bottom point.”
Lower prices are hurting farmers all over the Charlotte region, home to some of the biggest soybean farms in the state, said Katherine Stowe, interim CEO of the North Carolina Soybean Producers Association. By acreage, soybeans are the largest crop in North Carolina, where about 1.6 million acres have been planted this year, she said.
“The tariffs are definitely affecting our farmers from one end of the state to the other for both soybeans and other commodities,” Stowe said. “But our growers, while they feel the pain ... in the long run they’re hopeful other markets will open up, or for better trade deals in the future.”
Among the Chinese-manufactured products hit with new 25 percent tariffs this month are compressors used in refrigerators and air conditioners.
Coupled with the dramatic jump in steel prices, that’s a double whammy for appliance manufacturers such as Electrolux, whose U.S. headquarters is in Charlotte.
Spokeswoman Eloise Hale said the company had to increase prices to retailers, although she declined to say how much. Electrolux also put on hold a planned $250 million investment in its Springfield, Tenn., manufacturing plant.
Meanwhile, tariffs on Canadian lumber have raised prices on new homes, said Rick Judson, owner of Charlotte-based Evergreen Group, a developer and building contractor.
As demand remains high, forest fires and disease have constrained supply and led to a “necessity and dependency” on imported lumber, Judson said.
That plus the tariffs equate to a $7,000 to $9,000 increase in the cost of constructing a new home, a price that is transferred almost directly to homebuyers at a time when demand remains high. North Carolina saw 74,300 new housing starts in May, according to the Federal Reserve Bank of Richmond, up 37 percent from the year before.
Commercial contractors are also feeling the pain.
Cerretti, of JE Dunn, said with contracts locked in, the impact on current projects is negligible. It’s future ones that would be affected if the trade war continues. “If it continues for long enough... prices will go up,” Cerretti said.
‘A lot of concern’
Todd Ford, founder of NoDa Brewing Co., said prices of his aluminum cans has jumped 10 percent. While that accounts for a relatively small portion of his overall production costs, he worries that tariffs could raise the costs of stainless steel tanks in any future expansion.
Vitner, the Wells economist, noted an argument could be made that steel and lumber prices were too low previously, as those items were “dumped” into the U.S. at artificially low prices.
“The cost of that dumping was lost jobs and wages, primarily in rural parts of the Carolinas,” he said.
Bob Morgan, president of the Charlotte Chamber, has been surveying chamber members about the tariffs. He said the response is running 2-1 against them.
“There’s a lot of concern that the tariff war escalates into something that slows economic growth across the board,” Morgan said.
“I sense that there’s a real ‘anxious patience’ coming from a lot of business leaders,” he added. “They continue to be hopeful that the threat of a full-blown tariff war will soon result in better trade agreements for the United States. (There’s) a willingness to let this play out.”