Do you know what President Trump’s basket of tariffs is supposed to accomplish? Do you think they will work for the country? Will they be good for you? How about for me?

Well I have my doubts. So yesterday I tried to find out by talking to a few of Graff-Pinkert’s most successful customers, who happen to be some of the brightest folks in the machining world. The following is what I learned.

Nobody is really sure about this tariff strategy. Twenty five percent of tariffs on a host of things from Canada and Mexico? Lumber and avocados will be more expensive if they finally go into effect. The idea is to reduce fentanyl from entering the country illegally. A noble idea that people will not argue with, but is a host of tariffs going to have just that effect?

For the machining business and automotive industry with so many suppliers in Mexico and Canada, the tariffs will be painful both in these countries and in the United States.

And now the President throws a whopper of a tariff on steel and aluminum. I talked to a customer of ours who orders 140,000 pounds of 52100 bearing steel each week, which is not made in America. He has some stockpiled, but not enough to allow him to satisfy his clients. 

Can a Nucor or another smaller steel company immediately start making it here? Not a chance. And why would they try when lobbying by high priced lawyers in Washington could convince the administration to change course anyway.

One of our customers has a 30% “float” built into large contracts with the Defense Department, meaning they are insulated from huge unexpected increases in materials, but few companies have that kind of clout.

Tariffs are supposed to Make America Great Again. Undoubtedly they can be used as weapons to accomplish certain goals such as controlling unwanted immigrants and dangerous drugs, and intimidating China. But the cost may be rampant inflation in America and significantly higher interest rates.

Our clients see some potential gains for them particularly related to China tariffs. The big question is will it be worth it if Ford F-150s cost $7,000 more in the coming year. 

Elon Musk, who has developed an extremely close relationship with the President, may gain if Chinese electric cars are shut out of the country, but he also might pay a price with his sales in China.

It seems too early to judge how the tariffs gambit ends up. Are they a viable tactic to show American power to gain useful goals? 

We can hope so. 

Personally, I think the Administration is overplaying its hand right now.

Question: How will the current basket of tariffs affect your business?