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How A Small Business Is Handling Steel Tariffs

Jun 23, 2018
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SCOTT SIMON, HOST:

Rice, beans, orange juice, motorcycles, bourbon are just some of the American products expected to cost more in Europe after the EU slaps a tax on them in retaliation for U.S. tariffs on imported steel and aluminum. Mexico has already applied tariffs to U.S. goods. Canada's counter-tariffs begin July 1. And China will levy $34 billion worth of tariffs on U.S. products beginning next month.

Jeff Padnos helps run his family's scrap recycling business in Holland, Mich., that was started by his grandfather in 1905. Mr. Padnos, thanks so much for being with us.

JEFF PADNOS: Thank you, Scott, for the opportunity.

SIMON: Will these tariffs affect you?

PADNOS: They already have. While other people are talking about what might happen, China quickly put a 25 percent tax on aluminum scrap from the United States. Then on May 4, they suddenly announced a complete moratorium on all scrap shipments from the United States into China. And it was effective immediately.

There was materials already on the water that couldn't be diverted. And so when they got to China, they were stacked up in the ports. They've been in limbo. We still have some material that we shipped that has not been able to clear through and get to the customer. So that's created a lot of uncertainty.

And then after that, effective May 31, they put on new inspection requirements. They've said that every load has to be inspected by one of their inspection people. And they've only got three offices in the whole United States, so it's still going to create a great bottleneck for us.

SIMON: Mr. Padnos, the intent of these tariffs is to create more business and jobs in the United States, obviously. So can you replace any lost business overseas with U.S. customers?

PADNOS: Well, in our case, we're dealing in worldwide commodities, and so we do look for new places to ship, and we will. But it's hard to make up a market like China. And we're only talking about things that have already happened. We're not talking about the impacts of - on our business of the other effects of a generalized trade war. I mean, all the things with steel are yet to be seen.

SIMON: Well, and you must have to worry about that in your business. What things concern you that might happen?

PADNOS: Well, the things that might happen is that our local manufacturers lose orders because they have to pay so much more for their steel that they are not competitive with the products that they make. An example might be somebody that makes a file cabinet. And if they punch out a hole for the lock, we would get the scrap from that.

But if steel becomes too expensive and they import the whole cabinet from another country, we don't get the scrap. But more important, the people that were making the product in the United States could lose their work as well.

SIMON: If people in the administration are listening to you today, would you - what would you tell them about the tariffs?

PADNOS: Well, I would quote George Will. Putting in a tariff is like putting up a blockade on your own country. Historically, when you put a blockade on someone, it was considered an act of war. In a way, it's like an act of war on ourselves.

And actually, this applies to China as well, interestingly, because we provide scrap aluminum that goes to them, and they need it. And if they have to use primary aluminum ore, that uses vastly more energy, and it works directly against their own environmental goals. So I would look for different solutions.

SIMON: Jeff Padnos is chairman of PADNOS, a waste recycler in Holland, Mich. Thanks so much.

PADNOS: Thank you very much for the chance, Scott. Appreciate it. Transcript provided by NPR, Copyright NPR.