When it comes to President Donald J. Trump, no issue has divided American business like his recent moves on trade. CEOs across the nation may be near-uniformly thrilled with the GOP tax cuts and regulatory rollback promulgated by his administration, but his trade policies and America First take on global commerce? That’s another story.
“The whole idea of this tariff is just bad economic policy,” says Paul Hylbert, chairman of Colorado-based Kodiak Building Partners, who reports that the construction industry has been in chaos since Trump announced steel tariffs in March. “It’s like an additional tax on the American consumer. It will cause inflationary pressure and job losses—and it certainly could lead to a trade war. The only way it could be good is if it’s vintage Trump, and he’s just doing this to unsettle everyone so we can pick up the pieces somehow.”
A Chief Executive poll of 212 U.S. CEOs taken in the immediate wake of the tariff announcement found 52 percent of respondents concerned the tariffs would damage the U.S. economy. But 38 percent said the tariffs would be beneficial in the long run, numbers the Trump administration finds reassuring. “That’s already an improvement over the results you would have had 12 months ago,” U.S. Commerce Secretary Wilbur Ross told Chief Executive in April.
Given the strong divisions, we reached out to mid-market CEOs across the country in a variety of industries to get their take and found some of them anxious, some angry, some wary—and some, like Joe Korff of Salem, Ohio-based iron castings company Korff Holdings, absolutely thrilled.
“We’ve been taking a beating for bad trade deals, and we need some relief,” says Korff, who dubs previous administrations “weak and uninformed” for tolerating trade imbalances perpetuated by NAFTA and other U.S. trade policies.
“This dumped product coming into the U.S. is killing local industry, destroying communities and creating societal problems [as a result of lost jobs and benefits]. The whole idea is, you want to sell it here? Make it here. There’s nothing wrong with that. You get muscle back in America.”
‘Why Should We Want to Partner?’
As you’d expect, that attitude is deeply concerning to mid-market technology exporters like Michael Zapata, executive chairman of Raleigh, North Carolina-based Protochips. His company makes an accessory that enables electron microscopes to examine nanomaterials and the liquids in lithium ion batteries. Its biggest market? China. “They are buying more electron microscopes than the rest of the world combined,” says Zapata, whose company has been growing 25 percent to 45 percent every year for the past four years. “They are on a path to leapfrog the West in their energy products.”
With more than 75 percent of the company’s revenues outside the U.S., the bulk of which are handled by distributors, relationships with foreign partners are important to Protochips. Zapata says the America First climate is making them harder to forge. “You can’t have these international partnerships if they are not a win-win for everybody. If we Americans are focused on barriers and a combative environment, you won’t have the strategic relationships. Potential partners will ask, ‘Why should we want to partner with an American company when we can partner with a company out of Europe?’”
Even some CEOs whose companies have benefited from Trump’s tougher stance on trade express concern about the long-term implications of abrasive policies. In late 2017, the U.S. International Trade Administration ruled against a Chinese company that pirated the unique liquid crystal display technology that Kent, Ohio-based Kent Displays developed.
While grateful that the piracy victory forced the Chinese competitor to exit the market, CEO Albert Green worries that Trump’s style will alienate potential customers for his company, which does 23 percent of its $40 million to $60 million in annual sales offshore in 40 countries. “You can have that [getting tougher on intellectual property] and not insult the people you’re trying to sell to,” he says.
‘Washington’s Concern Is Not Canada’
The possibility of NAFTA’s demise is also a worry for Accuform CEO Wayne Johnson, whose Brooksville, Florida-based company sells “Danger High Voltage” warning signs and other safety signage and equipment in 80 countries. Johnson is a fan of Trump’s new tax law, which he feels will encourage U.S. companies to build more domestic factories, but has found himself obliged reassure foreign partners fretting about talk of leaving NAFTA.
“People in Canada are very concerned about NAFTA,” he says. “I tell them Washington’s concern is not Canada—it’s much more about Mexico. Canada’s wages are higher for the most part than in the U.S., so they are not competing on the basis of lower wages. If anything does happen with NAFTA, it might be good for Canada and not so good on the Mexican side.” Obviously, a disruption in NAFTA eliminating the 8 percent to 9 percent of Accuform’s sales that are made in Canada would hurt. “It would be significant if something happened to the trade deal,” Johnson says.
‘We Need to Be Part of That Trade Block’
In a similar vein, America First policies are causing Scott Defelice, CEO of Oxford Performance Materials, to rethink his company’s global strategy. The South Windsor, Connecticut-based company has sales of between $5 million and $10 million, 30 percent of which are offshore. Defelice had been exploring the possibility of building a manufacturing facility in Britain but scuttled the plan when the UK’s access to the European market became uncertain after BREXIT.
Now, he worries about a similar situation in the U.S. and is changing his plans accordingly. “Before the America First politics came into vogue again, we were thinking we could export our way into [Asian] markets and build more critical mass before we put `down a footprint there,” Defelice explains.
“But our thinking has changed. We are out of the Trans-Pacific Partnership. Our traditional global partners are questioning what the hell we’re up to. Rather than pushing an export strategy, we’ve decided to put up a manufacturing facility in Japan. We need to be part of that trade bloc.”
Shifts in the trading environment are driving companies like Oxford Performance, which recently won regulatory approval for its medical devices in Japan, to open operations overseas rather than serve foreign markets from the U.S. “This is a critical point as far as the America First policies are concerned,” Defelice says. “If the legal and trade infrastructure allows you to participate globally as a small or medium-sized company, you can do that from a domestic position. What’s happening now is that the trade environment is forcing you out of the gate earlier.”
‘The Chinese Started a Trade War’
Arthur Mann, CEO of the Wrightsville, Pennsylvania-based engineered castings company Donsco, dismisses such worries. “We’ve been in a trade war with China for more than 20 years—we’re just now starting to show up for the fight,” he says. Some 25 percent of U.S. foundries shuttered in the last few decades.
“The Chinese started a trade war back in 1994, when they were approved for entry into the World Trade Organization and then devalued their currency 40 percent the next week. Remember that?”
It’s an argument Carey Smith, founder of Lexington, Kentucky-based fan manufacturer Big Ass Solutions finds unconvincing. “There are a lot of countries in the world that impose ridiculously high tariffs on products that we as U.S. manufacturers sell to their countries, but just because the guy next door is throwing rocks at your house doesn’t mean you should throw rocks back,” he says. “Somebody has to be the adult in the situation.”