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brewedsunlight · 3 years ago

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Solar PV’s recycling opportunity

As new, more efficient photovoltaic cells become cheaper and more common, and they spread to more and more installations at every scale, they come with a future problem that could get out of hand in the United States, or it could be a source of great opportunity in the industry: solar waste recycling.

According to The MIT Technology Review, the materials used in solar panels could be worth $2 billion a year by 2050, with the amount of decommissioned cells reaching 80 million metric tons. An analysis by Research and Markets predicts that the market for recycled solar panels and parts could grow over 18 percent per year and be worth over $100 million by 2027.

This value can be captured by manufacturers redesigning their products for greater recyclability ahead of regulators — especially since, as prices fall and efficiencies improve, consumers will be more likely to want to upgrade before the 30-year lifespan of their panels is up, according to Harvard Business Review.

The solar waste problem

Solar waste is generated from both cells that reach the end of their useful lives and from cells that get destroyed in natural disasters. In 2017, Hurricane Maria destroyed several solar installations in Puerto Rico, resulting in tons of waste as panels were smashed by high winds or flying debris or were uprooted from their housings and became debris themselves.

The waste that resulted presented difficulties not only because of its quantity but because it can’t go into normal landfills on account of the toxic chemicals used in solar cell production: heavy metals like cadmium can leach into the environment through water. To make things worse, much of the United States’ e-waste has historically been exported to China, where low labor costs and limited environmental protections meant that some valuable materials were recovered and the rest caused lots of birth defects. But China no longer accepts e-waste on the same scale, creating a potential ecological backlash to decarbonization.

A solar cell is mostly made out of materials like glass and aluminum. These are easy to recycle. For cells that have reached the end of their working lives, they may even be possible to directly reuse. The rest is the meat of the cell, the materials that exhibit the photovoltaic effect, combined with the semiconductors and other things needed to get a useful electric current out of them.

According to Waste Dive, it currently costs $20-$30 to recycle a solar panel, but the recovered materials are only worth about $3-$4, which creates a substantial barrier to keeping them out of landfills. Some businesses are focusing on reuse — recovering functional panels and selling them to markets that can’t afford new ones.

One problem is that regulators sometimes classify solar panels as hazardous waste, which adds substantial costs to recycling. Another is that many solar panels are not designed with recycling in mind, although the European Union requires manufacturers to produce solar cells that are 85 percent recyclable — similar regulation doesn’t exist in the United States.

The global pandemic, the rise of populist politics in the United States, and greater environmental awareness may also combine to create opportunities. COVID-19 continues to disrupt global shipping routes while it’s increasingly recognized that shipping so many products across the Pacific is very bad for the environment. Politicians of both major parties in America have made tentative steps towards adopting some kind of industrial policy to promote the manufacturing industry and while the Trump administration’s tariffs are gone, The New York Times reports that some Democrats want to replace them with taxes on imports from polluting countries, like China. Such a combination of factors may provide subsidies to manufacturing solar panels in the United States while making Chinese imports more expensive — and the raw materials recovered from solar waste would be in demand because mining and refining metals like aluminum is also very dirty.

The Solar Energy Industry Association, the main trade group for the solar industry in the United States, is pushing for states and the federal government to adopt regulations in line with the European Union. Companies that already handle solar waste also support the regulations, while ones that design, manufacture, and import the modules fear resellers and recyclers shutting them out of markets with their own products.

Solar recycling has definite potential and a large role to play in creating an “ecosystem” for renewable energy. Businesses should not let the opportunity go to waste.

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the-breakfast-chub · 3 years ago

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Solar PV’s recycling opportunity

The solar waste problem

Solar recycling has definite potential and a large role to play in creating an “ecosystem” for renewable energy. Businesses should not let the opportunity go to waste.

Subscribe to Renewable Energy World’s free, weekly newsletter for more stories like this

from https://ift.tt/2X7btow

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americafuneral10-blog · 6 years ago

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Will U.S. Tariffs Ramp Up Casket Pricing? Major Companies Weigh-in…

When the stream of controversial news headlines is more of a cascade than a trickle, it’s easy to become inured to their shock value — and hard to parse exactly how those policy changes are affecting your life.

But if you’re a death care professional, Trump’s tariffs could cause significant changes to your work and livelihood. The increasing costs of raw materials and importation are driving up manufacturing and shipping expenses in a wide range of industries, including casket-making — which has broad-reaching ramifications on retail pricing, consumer choices, and the funeral business at large.

A brief history of tariffs

A tariff is a border tax or duty charged on imported goods, paid by the importers. The funds are collected at customs by the government imposing the tariff, and are used to support government expenses and projects.

A global push toward free trade agreements means that tariffs are at a historical low: around 2.9%, according to CNN Money. What tariffs do persist tend to be in the agricultural sector and act as a safeguard to domestic farmers; when imported goods demand a higher price, what we produce here at home can be sold at a more competitive rate — at least in theory.

But tariffs can also wreak economic havoc, even in the countries that levy them. Domestic manufacturers often rely on imported materials to fabricate their goods, and tariff-related price increases can drive up the cost of U.S.-sourced materials as well. Furthermore, foreign companies with American customer bases, who manufacture their products overseas, may run into a variety of costs at border crossing, including not only the tariffs themselves but also inspection fees.

Since the Trump administration has taken office, tariffs have been imposed on a number of consumer goods and materials, from solar panels and washing machines to steel and aluminum.

How Trump’s tariffs and trade changes are affecting the American market

Trump’s tariffs have been, in large part, poorly received by both financial professionals and the American public at large. Almost 80% of a group of 60 economists agreed that the tariffs on steel and aluminum in particular would damage the U.S. economy, according to a survey by Reuters. The remaining economists in the survey believed the tariffs would have little or no effect, while not a single one of them thought the tariffs would have any net benefit.

Although the tariffs were imposed in part to help aluminum and steel workers in America’s rust belt, many families in the region find the new policies are harmful rather than helpful. The tariffs have also driven up production costs in a wide range of U.S. industries, from automaking to beer brewing.

The death care industry is by no means immune to these new fees’ impact. For both U.S-based and importing casket-makers, steel tariffs in particular have driven up the price of raw materials — and may cause changes across the market, from production to final sale.

How increased tariffs are changing the game for casket makers

“The tariffs have had an impact on all [casket] manufacturers,” wrote Justin Thacker, the director of manufacturing at Thacker Caskets, in an email. Despite the company’s commitment to producing their caskets on U.S. soil — and with domestically-sourced materials — “the recent tariffs have caused all steel prices to climb sharply,” he went on. “We have done our best over the year to manage these increases, but steel is our largest raw material expense.”

Both Thacker and the company’s director of sales, Bob Lowcher, suggested that the firm had been able to absorb the additional cost without an undue increase in wholesale prices, largely thanks to their choice to produce many of their own casket components at a large manufacturing facility in Florence, Alabama. “We haven’t had to do anything out of the ordinary as far as how we run our business,” said Lowcher. “It’s the normal course of business. You see upticks in raw material costs from time to time.”

The industry generally sees one price increase across the board each year, occurring in early October. This year’s, Lowcher said, didn’t seem to be out of line with historical trends: “I would say this was an average year for price increase.”

But the same might not be true for those companies manufacturing overseas and importing their finished products — like Sich Casket Company, whose manufacturing facilities are in China, or Batesville, which produces many of their caskets in Mexico.

“If you’re producing caskets outside of the U.S., you might be seeing a double increase from both raw material [cost increase] and the tariffs in place,” said Lowcher.

Sich’s founder, Sirius Chan, said the company would not yet adjust their wholesale prices, though the price of the American wood the company uses at its Chinese plant has increased thanks to the 10% tariff passed in September. “By sharing the increased tariff costs with our distributors,” he wrote, “we try not to pass on the increase to our funeral home customers.”

Batesville has also avoided increasing their prices so far, according to Jody Herrington, general manager of Albuquerque’s Strong-Thorne Mortuary, which sells Batesville products. She suspects the large company is able to absorb the additional costs due to its robust and diverse product line.

But Greg Beavers, vice president of Wise Products, Inc — an outside-burial-container manufacturer and one of Sich’s distributors — expressed concerns about the tariffs’ impact. “As soon as the administration was talking about putting the tariff on [steel],” he said, “mills started raising their prices.”

“We’ve seen a dramatic increase in that [price],” Beavers went on. “You can only eat so much of it.” According to Beavers, distributors, who serve as the middlemen between manufacturers and funeral homes who sell the caskets at retail, end up being the ones paying the difference.

“I’m kind of very upset about it,” he said, explaining his struggle to keep products priced competitively while guesstimating the effect of constantly-changing trade agreements. “We kind of have to take the brunt of the increase until it’s our price increase time and then see what we can do from there,” he said. “You don’t want to put increases on and then the tariff comes off — it’s good to be as stable as possible.”

Broader ramifications for the funeral industry

Casket-makers and distributors aren’t the only players in the death care industry that may be affected by changing import costs. As costs shift and materials become scarcer, mortuaries may find themselves unable to stock certain products — which could mean fewer funereal options for grieving families.

“The nature of commerce today is so globalized,” said Herrington. “We get so many things from around the world that… could become cost-prohibitive.”

She mentioned cloisonne urns in particular: “You can’t find them made in America; they’re all made in Asia. Families just love them, and they come from areas that are targeted. I worry that… it’s a style we may find harder to source,” she said, due to the increased cost associated with the tariffs.

Of course, opinions about the tariffs differ significantly depending on who in the industry you speak with. Bob Lowcher, the director of sales at Thacker, said that “if anything, the tariffs have kind of right-sized the pricing” for American producers, since the foreign competition could come in so much lower. From the U.S. perspective, he went on, they served to “level the playing field.”

Beavers, however, had a different take-away entirely: “This tariff has pretty much just hurt U.S. companies,” he said.

For now, professionals across the death care industry (and many others) will have to wait and see what happens during the Chinese trade negotiations scheduled to start in January, which have forestalled the originally-proposed tariff increase to 25%. It will instead remain at its current 10% rate for 90 days.

Of course, it’s anyone’s guess as to what the landscape will look like by April. As Herrington put it, “You never know what the final outcome will be with this… gentleman.”

Article by Connecting Directors contributor Jamie Cattanach

The post Will U.S. Tariffs Ramp Up Casket Pricing? Major Companies Weigh-in… appeared first on Connecting Directors.

Will U.S. Tariffs Ramp Up Casket Pricing? Major Companies Weigh-in… published first on YouTube

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theconservativebrief · 6 years ago

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In an apparent attempt to punish General Motors for the planned job cuts it announced last week, the White House said Monday that eliminating subsidies for electric cars is now its official policy, Reuters reported.

Currently, automakers get a $2,500 to $7,500 subsidy in the form of a tax credit for consumers for their first 200,000 electric vehicle sales. EV maker Tesla has already hit the cap, GM will hit it later this year, and the auto industry wants an extension.

The fact that manufacturers are hitting their EV subsidy caps is a testament to the success of EVs on US roads. Automakers and utilities just celebrated the sale of more than 1 million electric vehicles in the US. And EV sales are now expected to surge. The Edison Electric Institute, which represents investor-owned power utilities, projects there will be 18.7 million EVs on US roads by 2030.

These vehicles are critical to lowering our emissions and limiting climate change. Electrifying transportation will help make our economy more efficient and eventually reduce overall energy demand.

But as GM’s recent restructuring plan shows, US automakers also aren’t finished manufacturing larger, less fuel-efficient vehicles. The company announced last week that it will end production of several sedans, including the Volt, a plug-in electric hybrid, to focus on larger cars. (GM said it also wants to devote more attention to Bolt, an all-electric car starting at $36,000, other EVs, and self-driving cars.) Earlier this year, Ford said it was pulling back from cars like the Focus and Taurus in favor of SUVs and crossovers.

So the US auto industry is in a weird spot, simultaneously betting on cleaner electric cars and bigger, more expensive cars.

Meanwhile, the Trump administration’s policies are threatening both of these tacks. Trump’s proposed tariffs on imported vehicles and car parts, as well as implemented tariffs on steel and aluminum, are threatening to raise the price of cars in the US. Cars, particularly EVs, now have a global supply chain, so seeing tariffs on components like batteries would make them less competitive. And while Trump can’t revoke the EV tax credits on his own since the subsidies for electric cars were put into place by Congress, he may embolden Republicans in Congress who want to eliminate them.

“We pay a lot of attention to what any president says,” said Dan Turton, vice president for North American policy at General Motors at an industry event last week. “But this electrification movement is going forward anyway.”

It’s a bit of a quagmire, so let’s walk through what White House policy could mean for both the present and the future of the US auto industry.

The $2,500 to $7,500 electric vehicle tax credit was a critical incentive to encourage EV adoption as it knocked a big chunk off the sticker price. And lately, some lawmakers and environmental groups have called for lifting the cap and extending the tax credit to more vehicles to encourage more sales instead of ending the EV subsidy.

“I think it would be shortsighted to end it now, especially when American companies are going to be hit,” said David Reichmuth, a senior engineer for clean vehicles at the Union of Concerned Scientists. Automakers say losing the tax credit now would hurt EV sales just as they are starting to take off.

The transportation sector is the largest source of greenhouse gases in the United States. Cars and light trucks comprise 60 percent of these emissions, making them an important target for any climate change mitigation strategy.

From an environmental perspective, it makes sense to invest in electric cars.

The trouble is building a mass-market electric car requires striking a difficult balance and the incentives are not always there. While the first electric cars hit the roads in the 1800s, the battery systems have only recently caught up in price and performance to their fossil-fueled competitors. There’s still a price premium for purely electric cars, and the charging infrastructure is still lacking in many areas.

But beyond targeting electric car credits, Trump’s actions on trade have made it more difficult and expensive to build cars in the US. Increasingly, cars made in the United States have a global supply chain, especially as they incorporate more high-tech materials and parts. Tariffs on components like steel could raise new car prices by upward of $7,000.

Trump’s new version of NAFTA, the United States-Mexico-Canada Agreement, raised the share of car components that must be sourced in North America for tariff exemptions to 75 percent. It’s expected to add $1,000 to the price tag of some vehicles.

For electric vehicle manufacturers, these developments are especially worrying. Take the lithium-ion battery, the current power source for most EVs, for example. Much of the world’s raw lithium comes from South America and Australia. That material is then shipped to China to assemble battery packs, which in turn are built into vehicles in the United States. With components that cross so many borders, tariffs and retaliatory tariffs stand to raise electric vehicle prices for buyers, which in turn could depress sales.

“These discussions about trade and potential limitations on trade are of some concern, but we’re also working toward making sure our production network is more flexible,” said Bryan Jacobs, vice president for government and external affairs at BMW Group, at an industry event last week. “Open and free trade is a formula for success, regardless of whether you are talking about making batteries or any other supply or component.”

Some manufacturers are already investing in building more components in the United State. Tesla’s gigafactory in Nevada is on pace to produce 60 percent of the world’s lithium-ion batteries.

The administration is now trying to freeze fuel economy standards put in place under Obama. Tougher fuel economy rules give an advantage to cars and trucks that don’t need fuel.

But manufacturers like Tesla also count on selling credits to other car companies that are having a harder time meeting the high mileage standards. It’s an important source of revenue for the companies, but if the rules get laxer, manufacturers have less of an incentive to build EVs.

And even as more electrics roll out, the bulk of the vehicles on the road will still run on fossil fuels for years, so making them more efficient is a crucial tactic in cutting greenhouse gas emissions.

“The push for electrification is good, but we still need conventional [fuel economy] standards,” Reichmuth said.

Carmakers seem to be convinced that electric cars will eventually dominate the roads. Yet they also think that for now, car buyers still want bigger, more luxurious cars that guzzle lots of fuel.

US car buyers have shown that they prefer larger vehicles. More than 17 million cars were sold in 2017. Two-thirds of them were SUVs and pickup trucks.

Witness the rise of bigger-than-a-car, smaller-than-a-truck crossover vehicles. These are typically built on the same platforms as sedans but are bigger and often sell at a higher price. While automakers like to brag that these crossovers can get about the same mileage as sedans from a decade ago, around 30 mpg, they still aren’t as efficient as smaller cars for sale now.

These vehicles also help make the business case to keep building cars in the US, where labor tends to be more expensive. “Higher-priced vehicles can tolerate higher labor costs,” explained Willy Shih, a professor of management practice at Harvard Business School.

Even foreign automakers with factories in the US tend to use them to build larger vehicles. Toyota builds Tacoma and Tundra pickup trucks in Texas. BMW builds SUVs and crossovers in South Carolina. Volkswagen is launching an SUV offensive with a new model to be built in Tennessee.

“If you think about it, it doesn’t mean sedan demand has gone away; it means a lot of sedan demand is captured by imports,” Shih said.

That’s led to a situation where US carmakers have proffered tepid support for their smaller, more efficient offerings. Volt customers have complained that dealers often knew little about the car and even tried to steer them away from it. Environmental groups have also argued that the automakers are not putting much weight in advertising cleaner cars, particularly electrics.

But while consumers are shelling out more money for bigger cars, they don’t want to spend more money on gas. SUV sales tend to rise as gas prices fall. Gas prices are currently low, which undermines the case for a vehicle that doesn’t use any.

Politically, it’s hard to argue for higher fuel prices, even on environmental grounds. President Obama’s first energy secretary, Steven Chu, was excoriated in 2008 when he suggested raising gasoline prices as a tactic to promote fuel efficiency, while his boss later bragged about low gas prices on his watch.

If the price of gasoline surges again, we could see a crash in sales of larger vehicles and a surge in electrics. For now, fossil fuel-powered cars aren’t going anywhere. Electrics are still a tiny slice of the overall car market, so there is vast room to grow as sticker prices fall. The market is in fact big enough for the both of them.

And in other countries, electric vehicles may come to dominate the roads much sooner. According to McKinsey & Company, China has a larger EV market than the United States and Europe combined. The vast majority of China’s EVs are made by Chinese companies, which in turn want to sell their cars around the world.

China and India are both weighing bans of fossil fuel vehicles, as a way to both improve air quality and boost their respective fledgling electric car industries. That means more than one-third of the world’s population will live in an area where internal combustion engines are no longer allowed.

Original Source -> Why US carmakers are betting on electric vehicles and SUVs at the same time

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mikemortgage · 6 years ago

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‘Winter is coming’: Labour dispute boils on at Quebec smelter as pall moves over Canada’s aluminum industry

Snowflakes fell early Wednesday morning along the shores of the St. Lawrence River in Bécancour, Quebec, where Jennie Vallé-Boucher is one of about 1,000 workers from an aluminum smelter, who is preparing to spend a second winter on the picket line.

In January, Alcoa Corp., which owns 70 per cent and operates the Bécancour smelter, locked out its unionized workers in a labour dispute that continues to boil over even as a cloud of uncertainty has settled over Canada’s aluminum industry.

One thing is clear, however: If and when the lock out ends, market conditions are unlikely to be the same as when it started. In the nearly 10 months that have passed since the dispute erupted, the U.S. enacted 10 per cent tariffs on aluminum imports, which remain in place despite negotiating a new trade agreement with Canada and Mexico.

“At least in the aluminum industry, this is totally uncharted territory,” said Jean Simard, president and chief executive of the Aluminum Association of Canada. “We’ve never gone through this.”

On Tuesday, Simard travelled to Ottawa and testified to the House of Commons’ International Trade Committee that U.S. tariffs are making it difficult to plan investments, and jeopardizing growth of Canada’s aluminum industry.

He said he fears the U.S. will try to replace the tariffs with quotas on the amount of aluminum that could be imported from Canada — a move that runs counter to his free market preferences.

The fact that the U.S. is gearing up for an even larger trade war with China has only created additional worries, said Simard.

“You don’t know where the economy is going,” he said. “The system around tariffs and quotas is not set. It’s very volatile.”

Aluminum prices have risen, but so have the input costs.

Justin Bergner, an analyst with Gabelli & Co. who covers Alcoa, said aluminum smelters nearly everywhere in the world are facing the same issue: Making a ton of aluminum requires two tons of alumina, which has increasingly become an expensive raw material. Aluminum prices are up in the past two years, but the increase has not kept pace with the rise in alumina prices which have nearly doubled since 2016.

So as alumina prices rose, aluminum producers’ profits fell. Except in China, where Bergner said alumina continues to be available at a cheaper price.

For Alcoa, which also produces alumina, it’s not been an unwelcome shift.

“If you look at the value of Alcoa now, and it’s not really hard to see, it’s almost all from their alumina refining business,” said Bergner, who estimated its alumina business accounts for 70 per cent of its roughly $10 billion enterprise value, by his calculations.

That may explain why last week Alcoa announced its intentions to close down two aluminum smelters in Spain, and reorganize into a single plant there.

The company also has said it opposes the U.S. tariffs on aluminum, and has applied for exemptions on imports from one of three smelters in Quebec that it operates. But not Bécancour.

Jim Beck, an Alcoa spokesman, said that the company is evaluating whether to apply for exemptions there. Rio Tinto Group owns the other 30 per cent of the Bécancour smelter but is not the operator.

The company won’t say exactly what it wants in negotiations from workers there, but said the facility has not performed as well as others and that it wants “better collaboration with the workforce.”

It also said it wants to reduce the workforce through natural attrition in the next few years, as nearly a third of the 1,030 workers there become eligible for retirement.

Meanwhile, workers at the Bécancour smelter, who belong to United Steelworkers Local 9700, have said they conceded to make changes to their pension so that active union members assume more risk, but that the negotiations have stalled over company plans to replace workers with subcontractors.

“We are ready to cut jobs,” said Dominic Lemieux, assistant to the union’s Quebec director, in Montreal. “We have no problem if you bring new technology things like that.”

But he said the union will fight against plans to cut jobs and hire subcontractors as replacement workers.

Earlier this month, Lucien Bouchard, the former premiere of Quebec, who was appointed by the province as a special mediator on the case, called off negotiations saying the two sides are still too far apart.

Thus, the fight rages on: Union members say they maintain a picket line 24 hours a day outside the smelter, and occasionally show up in front of a manager’s house.

Last week, the company called the police after it said 40 union members showed up at on offsite meeting for its managers, and began protesting the lock out. No one was arrested.

In recent weeks, Lemieux said the union has taken to writing letters to Alcoa shareholders and board members, explaining all the concessions they are willing to make.

For Vallé-Boucher, who has operated heavy machinery at the smelter for a decade, and who stands in the picket line, she said the hardest part has been people in the community who post on Facebook that the union members should accept minimum wage and cuts.

“Behind Facebook you can do whatever you want,” said Vallé-Boucher. “They say stuff they may not necessarily say if you’re in front of them.”

Still, she said her union members will continue to picket, even though it’s not always easy.

“It’s quite hard and winter is coming,” said Vallé-Boucher.

• Email: [email protected] | Twitter: GabeFriedz

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olko71 · 6 years ago

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New Post has been published on All about business online

New Post has been published on http://yaroreviews.info/2018/09/caterpillar-leans-on-old-playbook-to-cope-with-trump-tariffs

Caterpillar leans on old playbook to cope with Trump tariffs

CLAYTON, N.C. (Reuters) – Six months into the U.S. tariffs on imported aluminum & steel, Caterpillar Inc (CAT.N) is finding that one of the best ways it can protect profits is a cost cutting strategy that is more than two years old.

At this sprawling factory in central North Carolina where it makes small front-end loaders, the company laid off workers in 2016 in response to plunging sales, consolidating two shifts into one under a program it calls the Operation & Execution Model.

Even though demand has picked up since then, its Clayton plant still runs a single shift & operates only four days a week. One third of the facility’s 550 employees are on flexible contracts.

The result: CAT is producing more loaders here with 30 percent fewer people on the factory floor than in the past, the company told Reuters.

It has redesigned all new machines it makes with over 20 percent fewer parts, cutting back on the consumption of steel which brings down the cost, Tony Fassino, vice president at Caterpillar’s building construction products, said after a factory tour in Clayton.

“Fewer parts numbers are a huge win,” Fassino told Reuters. “It improves safety, it improves the quality, it improves the cost.”

Now, these cost cutting approaches are helping counter the financial impact of U.S. President Donald Trump’s trade wars.

The heavy-duty equipment maker estimates the import tariffs will inflate its raw materials costs by up to $200 million between July & December, though it does not provide a forecast for manufacturing costs in 2018. Caterpillar has said it would offset the impact through a price increase that went into effect on July 1 & general cost cutting measures, helping it post a record profit for all of 2018.

Caterpillar’s increasing emphasis on operating efficiency has proven timely, helping to bring down the cost of production at a time when fabric expenses are mounting on Trump’s import curbs, & capacity constraints are driving up freight costs.

(For graphic click tmsnrt.rs/2NG2DrF)

An internal calculation if to Reuters, previously unreported, shows that the measures have accounted for half of the improvements in the profit margins since 2015 at the company’s construction industries division. Since January 2017, the efficiency model has been rolled out across the company, yet CAT would not disclose more details.

CAT, Deere & Co (DE.N) & Harley-Davidson Inc (HOG.N) are among the many manufacturers trying to keep a lid on expenses to manage with a 30 percent rise in U.S. steel prices since the start of 2018.

Those rising costs, along with a tit-for-tat tariff war with China, have clouded the earnings outlook for industrial companies, dragging down their shares.

Despite a recent rally this month, Caterpillar shares are down approximately 9 percent from their late-January levels, compared with a 0.4 percent decline in S&P 500 industrials index .SPLRCI, showing investors have yet to fully reward the company for its industry-best efficiency results when it comes to operating margins & return on net operating assets.

(For graphic click tmsnrt.rs/2CN5P0g)

Slideshow (3 Images)

Steve Volkmann, a machinery analyst at Jefferies, attributes the stock’s underperformance to concerns that the company’s greater exposure to foreign markets & a sizeable presence in China make it more vulnerable to escalating trade wars.

“It is disappointing that they can’t obtain paid for satisfactory quarters these days,” he said, referring to the company’s strong earnings in the final quarter.

While abroad markets do account for more than half of Caterpillar’s sales, the company has an evenly spread manufacturing footprint across the globe, which Volkmann & other analysts say make it better placed to deal with the tariffs.

The company has in addition tried to put at rest worries approximately its operations in China, saying the trade tensions have not impacted its commerce there.

COST CONTROL

As part of its cost cutting effort, CAT commerce heads have been mandated to reduce the overall manufacturing cost of every new product by at least 5 percent, one Caterpillar company executive told Reuters. This entails cost cuts by suppliers as well.

Donaldson Company Inc (DCI.N) – which makes filters for CAT’s machines – told Reuters that it tries lower the cost of production every year through fabric substitution or automation or efficiency gains. Cuts in travel & entertainment budgets helped the company improve operating income by 40 basis points in the latest quarter.

CAT’s Operation & Execution effort affects both production strategy decisions & small details of every operation.

For example, it does not make smaller front-wheel loaders in the United States even though their sales in North America are growing. Instead, semi-finished machines are shipped in from abroad factories to the Clayton facility, where tires & buckets are installed, Fassino said.

This not only allows better utilization of the company’s factories, yet in addition provides flexibility to tailor the machines to the requirements of local customers.

Similarly, CAT has been managing freight contracts for deliveries across North America since 2016. Apart from improving the predictability of deliveries, & reducing insurance & damage claims, the contracts are letting Caterpillar leverage its scale & volume to moderate transportation costs in its supply chain.

OPERATIONAL EFFICIENCY

At the Clayton plant, the company’s focus on lean manufacturing, efficiency & flexible cost is on full display.

Parts are put in a sequential order in stand-up bag carts next to the assembly line so that assemblers do not have to spend time looking for them.

Suppliers have been instructed to pack the parts in the same way. In case the parts do not arrive in the required order, workers in the factory warehouse are required to unpack & rearrange the parts before they reach the factory floor.

Automation is increasingly being used to test machines. Components & parts are moved on tugger trains instead of by fork lifts to save time & cost.

“Save one minute here & save five minutes there. Add all that up, you have two shifts to one shift,” said Caterpillar’s Fassino.

Reporting by Rajesh Kumar Singh; editing by Joe White & Edward Tobin

Our Standards:The Thomson Reuters Trust Principles.

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thegoviza · 7 years ago

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Tariffs Wreak Havoc with The Auto Industry

Trade issues have been concerning the automotive industry for some time. Whether it be NAFTA renegotiations (or NAFTA scrapping), Section 232 Tariffs, Exceptions to Section 232 Tariffs, ever since the current administration was elected, the Dashboard has been predicting that trade issues could upend the automotive industry. That day appears to have come as the latest round of tariffs on China include those aimed at autos and parts. China’s retaliation was swift. And, it specifically targeted (among other things) light vehicles from the U.S.

Somewhat ironically, and perhaps betraying the current administration’s lack of understanding of the Automotive industry, the retaliatory Chinese tariffs will most directly impact BMW. While the Bavarian Motor Works is routinely thought of by its German roots, it is the largest U.S. exporter of light vehicles thanks to its large Spartanburg, South Carolina plant. Thus, while the administration targets “foreign” auto supply and manufacturers, the people of Spartanburg may feel the hurt before anyone else.

And what about companies thought of as “American”, such as General Motors? Well, GM makes the Buick Envision crossover in China. That vehicle is about to be about $8,000 more expensive. This almost certainly makes the Envision no longer competitive in its segment.

Of course, China is only the beginning. Comparatively speaking, China is a small importer of vehicles to the United States – less than 1% of all vehicle imports. Last week, German Chancellor Angela Merkel sent a shot across the bow: “We should think about the strategic significance of the auto industry for the European Union so we can prepare an exchange with the U.S.,” she said. Increased tariffs on European Union auto makers would almost certainly result in across the board price increases of vehicles of all kinds in the United States. Add to that the uncertainty in the ongoing NAFTA negotiations and anyone thinking of buying a vehicle in the United States may want to do that now instead of later when the price is almost certain to spike.

The global auto industry is one of the greatest success stories of the use of global supply chains. Nationalities of companies traditionally thought of as “American”, “German”, “Japanese” etc. have long ago become obsolete as “foreign” companies build plants in the United States (or Canada, or Mexico) and bring with them a small village of associated suppliers. Plants like Kia Motor Manufacturing Georgia and Hyundai Motor Manufacturing Alabama and Toyota Motor Manufacturing Texas are just the start in a long line of such examples. These “foreign” companies now make more vehicles in the United States than the “domestic” companies.

As recently as 2014, the United States exported over 2 million vehicles worth over $57 billion. Sure, plenty of vehicles and their parts are imported into the country. Some of those parts, thanks to NAFTA, may very well cross the border multiple times as they are incorporated into components, systems and vehicles. The plain fact is that at this point, the global automotive industry has figured out how to build vehicles all over the world, regardless of the badge on the vehicle. A trade war over autos or any of the primary raw materials used in autos (e.g. steel) will continue to have essentially one major impact: the price of your car, your truck, your replacement parts, your service and everything else is going up. One report had prices going up on average $5,000-$7,000 and reducing auto sales by 4 million vehicles. Such a drastic reduction in North American sales (about 20%) would also have to result in plant slowdowns and layoffs. Even Wall Street has appeared against this course of action, having sent auto stocks down when the issue makes the news. All of this may explain why it is difficult to find anyone within the automotive industry who supports the tariffs or who wants to materially renegotiate NAFTA.

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party-hard-or-die · 7 years ago

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As Trump

CHICAGO (Reuters) – Encouraged by a booming demand for construction equipment, Mike Haberman was planning in early February to hire at least 30 more workers for the manufacturing facility of his Gradall Industries in Ohio.

That plan now is shelved, Haberman said, because the cost of steel used in Gradall’s telescopic excavators and vacuum trucks shot up by one-third following President Donald Trump’s crackdown on steel imports. As steel costs account for 35 percent of his cost of production, he fears rising prices would not only hurt his export sales, but also give an edge to foreign rivals at home.

“At this point, we really need more visibility before we would bring in more workers,” he told Reuters.

When Trump signed a $1.5 trillion package of tax cuts at the end of 2017, supporters predicted businesses would respond this year with a burst of hiring and investment.

But Reuters interviews with more than a dozen small to mid-sized manufacturing executives and recent U.S. economic data reveal Trump’s protectionist trade policy is starting to lead some of them to take a more cautious approach, and forcing them to put new investment and hiring plans on hold.

While these manufacturers lauded the administration’s push to make U.S. businesses globally competitive through measures such as the tax overhaul and a deregulation drive, they complained that the steel and aluminum tariffs along with the escalating trade spat with China were undercutting those benefits.

Trump has proposed a separate 25 percent import tariff on some 1,300 Chinese products to try to force changes in Beijing’s intellectual property practices. If the tariff comes into effect, they would upend Haberman’s components supplies from China, he said.

The steel and aluminum import tariffs imposed in March were designed to protect the American industries and its workers from global overcapacity and unfair trade practices. Trump justified the measure saying protecting the industries was important to the country’s national security. He argued that the tariffs would re-open closed mills, sustain a skilled workforce, and maintain or increase production.

But the tariffs, which came into effect on March 23, have driven up raw material costs and caused supply delays, rendering the manufacturers’ “Made in the USA” products uncompetitive against their foreign rivals, according to these manufacturing company executives.

Mike Schmitt, president at The Metalworking Group in Ohio, said his metal fabrication company has lost around a thousand hours repricing and renegotiating contracts because it can’t honor the old prices.

The company has delayed plans to spend around $500,000 on equipment this year and bring on new staff to expand.

“It’s going to be 2019 before we buy anything because we don’t have enough confidence to do it. There’s just too much uncertainty out there right now,” Schmitt said.

The Institute for Supply Management (ISM) survey on Tuesday showed how widespread that sentiment is: manufacturers slowed down hiring for a second straight month in April amid complaints that the tariffs have brought business planning to a standstill.

Nicole Sahin, chief executive at recruitment firm Globalization Partners in Boston, says a large multi-national client of hers recently pulled back from an $800 million investment in a U.S.-based energy project after rising steel costs made the investment not viable.

Sahin said all her clients who are exposed to steel prices have put their investment plans on hold because of the business “uncertainty” caused by the tariffs.

LIMITED OPTIONS

Big manufacturers are looking to manage cost increases by controlling expenses through their supply chains or raising prices for their products.

But not all small manufacturers have those options.

Take Florida Marine Tanks, which makes fuel, water and holding tanks for yachts. Company President Orestes Monterrey said aluminum accounts for 70 percent of the company’s cost of production, which has risen 26 percent since December.

An employee torques the hydraulic fittings on the valves of a Grandall XL4300V Wheeled Excavator at the company’s facility in New Philadelphia, Ohio, U.S., April 18, 2018. Picture taken April 18, 2018. Michael Norman/Grandall Industries/Handout via REUTERS

When the Henderson, North Carolina-based company tried to pass along rising aluminum costs, customers slowed down orders.

The company has shelved a $2.2 million plan to expand its North Carolina facility and hire 46 new workers. It also fired four workers that were hired in December for the project, Monterrey said.

“(We) don’t know where business is going to go,” said Monterrey. “Customers are reducing their orders.”

In a March study, Trade Partnership Worldwide, LLC estimated the steel and aluminum tariffs would result in a net loss of nearly 470,000 U.S. jobs. The proposed tariffs on Chinese imports, the Washington-based consulting firm estimates, would put 134,000 jobs at risk.

“There is just no way to sustain expansion, develop new products and bring on new employees – as we thought we were going to do this year,” said Troy Roberts, chief executive officer at Colorado Springs-based Qualtek Manufacturing.

Roberts’ company provides stamped parts to the medical device and aerospace industries. Qualtek was planning to invest up to $1 million in new capital equipment and expand its workforce by 17 percent this year.

Even though the company purchases domestically-produced steel and aluminum, Roberts says the metal tariffs are projected to increase Qualtek’s raw material costs by $300,000, putting the investment and workforce expansion plans in jeopardy.

TIGHT SUPPLIES, COST CUTS

While the tariffs have increased the demand for local steel and aluminum, domestic mills have not yet fully ramped up their capacity. Data from the American Iron and Steel Institute shows capacity utilization at the steel mills has gone up by just 1.1 percentage points from the same period last year.

As a result, the lead time for delivery of raw material is going up. Roberts of Qualtek Manufacturing says his lead time has doubled to 14 weeks. In Florida Marine Tanks’ case, a shipment scheduled for early March hasn’t arrived yet.

Trump has postponed a decision on whether to withdraw temporary exemptions from the metals tariffs on Canada, the European Union and Mexico until June 1, and has reached agreements for permanent exemptions for Argentina, Australia and Brazil.

The imports from the exempted countries, however, will be restrained by quotas. Manufacturers are not sure how the quotas will be implemented or will curb rising metal prices.

Faced with supply delays, some manufacturers have decided to pay the tariffs and get the metals from overseas.

The Vollrath Company in Wisconsin, which makes cookware and bakeware items, has started importing aluminum from China after local mills couldn’t meet its demand.

The company’s chief financial officer, Steve Heun, says the tariffs, CUT including the latest countervailing duties, will make its aluminum products at least 20 percent more expensive than those of its foreign rivals, and are estimated to increase its input costs by as much as $6 million a year.

Its working capital requirements have gone up by 10 percent as the company is now forced to hold more inventory, Heun said.

Slideshow (3 Images)

Vollrath employs 1,000 people in Wisconsin and had plans to hire 25-50 workers this year. But with the tariffs weighing on its profitability, Heun says the company is looking for ways to trim costs and has halted new hiring.

“If there was any positive feeling about the tax overhaul, clearly, it’s been wiped out,” said Heun.

Additional reporting by Nick Carey; Editing by Joe White and Edward Tobin

The post As Trump appeared first on World The News.

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dani-qrt · 7 years ago

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As Trump

“At this point, we really need more visibility before we would bring in more workers,” he told Reuters.

When Trump signed a $1.5 trillion package of tax cuts at the end of 2017, supporters predicted businesses would respond this year with a burst of hiring and investment.

The company has delayed plans to spend around $500,000 on equipment this year and bring on new staff to expand.

“It’s going to be 2019 before we buy anything because we don’t have enough confidence to do it. There’s just too much uncertainty out there right now,” Schmitt said.

Sahin said all her clients who are exposed to steel prices have put their investment plans on hold because of the business “uncertainty” caused by the tariffs.

LIMITED OPTIONS

Big manufacturers are looking to manage cost increases by controlling expenses through their supply chains or raising prices for their products.

But not all small manufacturers have those options.

When the Henderson, North Carolina-based company tried to pass along rising aluminum costs, customers slowed down orders.

The company has shelved a $2.2 million plan to expand its North Carolina facility and hire 46 new workers. It also fired four workers that were hired in December for the project, Monterrey said.

“(We) don’t know where business is going to go,” said Monterrey. “Customers are reducing their orders.”

TIGHT SUPPLIES, COST CUTS

The imports from the exempted countries, however, will be restrained by quotas. Manufacturers are not sure how the quotas will be implemented or will curb rising metal prices.

Faced with supply delays, some manufacturers have decided to pay the tariffs and get the metals from overseas.

The Vollrath Company in Wisconsin, which makes cookware and bakeware items, has started importing aluminum from China after local mills couldn’t meet its demand.

Its working capital requirements have gone up by 10 percent as the company is now forced to hold more inventory, Heun said.

Slideshow (3 Images)

“If there was any positive feeling about the tax overhaul, clearly, it’s been wiped out,” said Heun.

Additional reporting by Nick Carey; Editing by Joe White and Edward Tobin

The post As Trump appeared first on World The News.

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newestbalance · 7 years ago

Text

As Trump

“At this point, we really need more visibility before we would bring in more workers,” he told Reuters.

When Trump signed a $1.5 trillion package of tax cuts at the end of 2017, supporters predicted businesses would respond this year with a burst of hiring and investment.

The company has delayed plans to spend around $500,000 on equipment this year and bring on new staff to expand.

“It’s going to be 2019 before we buy anything because we don’t have enough confidence to do it. There’s just too much uncertainty out there right now,” Schmitt said.

Sahin said all her clients who are exposed to steel prices have put their investment plans on hold because of the business “uncertainty” caused by the tariffs.

LIMITED OPTIONS

Big manufacturers are looking to manage cost increases by controlling expenses through their supply chains or raising prices for their products.

But not all small manufacturers have those options.

When the Henderson, North Carolina-based company tried to pass along rising aluminum costs, customers slowed down orders.

The company has shelved a $2.2 million plan to expand its North Carolina facility and hire 46 new workers. It also fired four workers that were hired in December for the project, Monterrey said.

“(We) don’t know where business is going to go,” said Monterrey. “Customers are reducing their orders.”

TIGHT SUPPLIES, COST CUTS

The imports from the exempted countries, however, will be restrained by quotas. Manufacturers are not sure how the quotas will be implemented or will curb rising metal prices.

Faced with supply delays, some manufacturers have decided to pay the tariffs and get the metals from overseas.

The Vollrath Company in Wisconsin, which makes cookware and bakeware items, has started importing aluminum from China after local mills couldn’t meet its demand.

Its working capital requirements have gone up by 10 percent as the company is now forced to hold more inventory, Heun said.

Slideshow (3 Images)

“If there was any positive feeling about the tax overhaul, clearly, it’s been wiped out,” said Heun.

Additional reporting by Nick Carey; Editing by Joe White and Edward Tobin

The post As Trump appeared first on World The News.

from World The News https://ift.tt/2FGVnUy via Everyday News

#News #Online News #World News #Today news #health News #Social News #Forex News #World The News

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newstfionline · 7 years ago

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One U.S. Factory Goes Global, While Trump Shrinks the World

By Peter S. Goodman, NY Times, Aug. 15, 2017

LEXINGTON, Ky.--Never mind the refrain that the American factory is supposedly a dinosaur in the age of globalization.

Here in the heart of horse country, some 700 American workers are designing and building premium ceiling fans. They tap local engineering prowess and export their wares around the world using a whimsical brand: Big Ass Fans. (Yes, that is really its name.)

But if the company stands as refutation to the premature obituaries for American manufacturing, the people running the operation worry about a looming risk. Talk of trade hostilities from Washington could shrink the globe, potentially yielding policy that could limit American exports while impeding access to crucial components of manufacturing.

The latest concern unfolds this week, as the Trump administration begins to renegotiate the North American Free Trade Agreement, redrawing the terms of commerce with Mexico and Canada.

The president has long criticized Nafta as a lethal threat to American livelihoods, asserting that it has spurred an exodus of jobs to Mexico while opening the borders to unfairly cheap, tariff-free imports. He has vowed to bring factory jobs back to the United States.

In outlining its goals for the Nafta renegotiation, the Trump administration listed as a priority shrinking American trade deficits with Mexico and Canada. Trade experts construed that as an intention to limit imports from those countries.

But many of the imports encouraged by Nafta are parts and raw materials used by American workers in fashioning finished wares. If Mr. Trump limits such imports, that could increase the cost of making goods at many American factories. It could provoke Canada and Mexico to similarly restrict trade, diminishing their purchases of American products.

In short, Mr. Trump’s efforts to bring work back to the United States could eliminate some jobs that are already here.

Big Ass Fans could wind up paying more for motors it imports from Mexico. It could lose sales to Canada and Mexico, now its two largest export destinations, and the destinations for more than a third of American exports over all.

“If we get into a trade war, that could significantly impact our U.S. production,” said Paul Lauritzen, the company’s vice president for manufacturing. “It just seems like the Trump guys are so focused on meeting campaign promises that they have failed to understand the reality of manufacturing and the global supply chain.”

In the world economy as depicted by President Trump, a product made in Mexico and sold on American shelves represents a theft. Such wares should have been forged in the United States, using American hands.

In this spirit, Mr. Trump first threatened to kill Nafta, and later agreed to the renegotiation getting underway. He has vowed to slap tariffs on a range of Chinese goods including steel. He has accused his predecessors of destroying American factory jobs by assenting to a series of abominable trade deals.

A growing body of research has concluded that a surge of imported goods produced in low-wage countries--especially China--has indeed eliminated millions of American jobs in recent decades. Some research has found that trade with Mexico modestly depressed wage growth during the 1990s in the most-affected blue-collar industries, among them the textile trade.

“We strongly support President Trump’s intention to reopen Nafta, and agree that it can be updated and improved to significantly enhance U.S. textile production, exports and employment,” Auggie Tantillo, president of the National Council of Textile Organizations, an industry trade group, said in written remarks submitted to a congressional panel in June.

Still, Mr. Tantillo argued against reinstating tariffs, while cautioning that the renegotiation must not disrupt “the high level of supply chain integration that exists today.”

Canada and Mexico are the largest and third-largest source of imports used by American companies in producing exports. In 2011, the most recent year for which government data is available, imports from those two countries yielded more than $1.6 billion worth of American exports.

Big Ass Fans began life in 1999 with a more staid name, the HVLS Fan Company. It specialized in enormous industrial-grade fans hung in vast spaces like factories and airplane hangars as a way to reduce use of heating and air-conditioning. The largest fans reach 24 feet in diameter and sell for upward of $8,000.

As customers began using blunt language to describe the products, the company took their declarations as its name. Its complex on the outskirts of Lexington features no end of brand-related mischief. Signs reserve a favored parking spot for the “Wise Ass of the Month.” The company mascot is a donkey named Fanny.

Beneath the joviality is a serious engineering operation. In 2008, when the global financial system was ensnared in disaster and the company’s revenue was about $30 million a year, it invested nearly one-third of that sum in a new research and development facility.

Company innovators used the facility to develop a popular feature that simulates the variable wind speeds of an ocean breeze, which provides relief from the constant blowing of a typical fan. The company started a new residential line under the Haiku brand, using a molded hunk of stainless steel, bamboo and other luxurious materials.

By 2012, revenue had tripled to $90 million, according to the company. Last year, it reached $240 million.

Big Ass Fans pays well above the state average, investing in the notion that happier workers are more productive. One-third of its assembly line workers earn more than $40,000 a year, plus health insurance, according to the company.

Ray Hawkins, 38, landed at the factory four years ago, after being laid off from his previous job as a welder at a nearby Toyota plant. He had endured four years of joblessness with a young son at home. Since starting at the company, he has worked his way up to a supervisory position and now earns nearly one-and-a-half times his previous pay.

“When I was at Toyota, I felt like I was just a number,” he said. “Now, everybody knows my name.”

But company overseers are feeling pressure.

Jamie Hillegonds, director of global operations, is looking for savings in the supply chain. The Trump administration presents itself as a champion of business, eager to strip away job-killing regulations. Yet she finds herself having to anticipate how the president might complicate her plans.

Her company buys motors from a Midwestern supplier known for quality and good prices. But the supplier recently shifted its production to Mexico. If the Nafta renegotiation makes that product more expensive, she will have to adjust.

“It’s very difficult to develop a global sourcing strategy based on Trump’s day-to-day whims about what he wants to do,” Ms. Hillegonds said.

Jonathan Bostock, the chief operating officer, wonders what happens if the Trump administration follows through on plans to impose tariffs on steel as a way to limit China’s exports. Big Ass Fans buys little steel directly, but the companies that supply its parts purchase the material.

“It goes downstream, and someone ends up paying,” he said.

#Nafta #US factories #Big Ass Fans #fan factory

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nedsecondline · 8 years ago

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The Food and Farm Fallout from a Trade War with Mexico

The menu at Centro, a popular Mexican restaurant in downtown Raleigh, North Carolina, relies on avocados, lemons, limes, and cheeses like queso fresco and cotija imported from Mexico. Since election day, Centro owner and chef Angela Salamanca, like many restaurateurs across the country, has grown increasingly nervous as she’s watched the Trump administration pursue a hostile stance toward Mexico on issues related to trade.

“Limes go up in price for Cinco de Mayo, and we’ve been able to ride those waves,” Salamanca said on a recent Friday just before the lunch rush. “But if there’s a tax imposed on Mexican products, we’ll be in serious trouble, and not just for our food, for our Mezcal, too. We would have to reconfigure our business. What would our offering be if we couldn’t have access to the necessities of Mexican cuisine?”

Angela Salamanca of Centro. Photo: Christina Cooke.

Behind Canada, Mexico is the largest supplier of agricultural goods to the United States, selling $21 billion worth of food to Americans in 2015, including $4.8 billion in fresh vegetables, $4.3 billion in other fresh fruit, $2.7 billion in wine and beer, and $1.4 billion in processed fruit and vegetables.

Because U.S. agriculture is so intertwined with the Mexican economy, the U.S. has a lot to lose in a trade war. As do American eaters: A full 93 percent of the Hass avocadoes in the U.S. come from Mexico, as well as 71 percent of the tomatoes and 15 percent of the sugar. Additionally, the U.S. imports 79 percent of its neighbor’s exported tequila.

Nevertheless, the Trump administration is taking an aggressive stance toward its southern neighbor. In addition to consistently expressing his intention to build a wall along the U.S.-Mexico border and strengthening the power of federal agents to deport undocumented immigrants, the administration appears committed to assaulting the country economically as well.

Days after his inauguration, the Trump team floated the idea of a 20 percent tax on imports from Mexico as a way to pay for the wall. House Republicans have proposed a different idea, a “border-adjustment” tax on imports. (Without an accompanying export tax, economists say the plan is likely not legal by World Trade Organization rules.)

The president has also voiced his intention to renegotiate the North American Free Trade Agreement (NAFTA), which President Bill Clinton enacted in 1994 to eliminate most tariffs between the United States, Canada, and Mexico. If he can’t renegotiate the agreement to get a “better deal” for the American worker, the president has threatened to withdraw completely.

Ben Lilliston, the director of corporate strategies and climate change with the Institute for Agriculture and Trade Policy, points out that the administration, which still does not have a Department of Agriculture head in place, is not paying much attention to the needs of farmers as it thinks about trade policy. “When you go after manufacturing, agriculture and food get hit in the crossfire of that trade fight,” Lilliston said. And, he adds, “Agriculture is probably the most sensitive topic in any trade negotiation, because it’s about food security.”

Like Salamanca, people across the food system find the administration’s antagonistic stance toward Mexico troubling. Everyone Civil Eats spoke with—from wheat growers in the Midwest to cattle ranchers in Texas, and from organic fruit and vegetable farmers in California to grocers and restaurateurs in North Carolina—said they see the administration’s anti-Mexico policies as harmful and counterproductive to the well-being of U.S. ag, big and small.

Grain and Cattle: Disrupted Supply Chains

The U.S. agricultural system is built on the practice of over-producing and exporting commodity crops like corn, wheat, soybeans, cotton, and rice, many of which are used to produce feed for the pork, poultry, and beef industries.

In addition to providing America a large portion of its food, Mexico is the third largest buyer of U.S. agriculture; in 2015, ag exports to the country totaled $18 billion, including $2.3 billion in corn, more than $1 billion each in soybeans, dairy products, pork, and beef.

Because commodity farmers rely on Mexico as a major buyer, they worry that setting off a trade war with the country will damage their ability to do business.

Tom Sleight, CEO of the U.S. Grains Council, the international corporation that develops export markets for U.S. grains including corn, barley, and grain sorghum, describes Mexico as an “excellent” customer that buys more U.S. corn than any other country. Since Trump took office, however, relations have grown more tense: “Customers [in Mexico] we’ve been working with for a decade are suddenly a little frosty,” Sleight said. “They say, ‘Why are you doing this to us? Why are you insulting us?’”

To the dismay of grain growers, the U.S.-provoked tension has already sparked retaliation. In response to Trump’s insistence that the U.S. build a wall and Mexico pay for it with a 20 percent import tax, Mexican government officials introduced legislation that would direct Mexico to buy corn from Argentina and Brazil instead of the U.S.

If the U.S. loses the Mexican market, Sleight said he expects demand to weaken, and the prices U.S. farmers receive for their grain to take a tumble, at least while grain farmers look for other markets. Ideally for the farmers, it won’t come to that: “They’re not interested in losing their best customer right now,” Sleight said.

Because their industry is also North American in scope, industrial livestock producers will face similar problems if U.S. trade relations with Mexico worsen, according to Kent Bacus, director of international trade for the National Cattlemen’s Beef Association.

The total U.S. cattle herd numbers roughly 92 million, about a third of which gets sold to Mexico and Canada. “NAFTA for us, it took our industry to new levels—it essentially created $1 billion export markets on both sides of our border,” Bacus said. Plus, it enables the U.S. cattle industry to find markets for cuts of meat, like tongues and intestines, which Americans do not find desirable.

Live cattle imports are also an important part of the equation. To keep its feed yards and packing facilities running at optimal levels—and ultimately, from closing down—the U.S. imports about 1 million cattle a year from Canada and 1.5 to 2 million from Mexico.

If the U.S. withdraws from NAFTA, Bacus said, it will give up both the zero-percent tariff it faces in Mexico and Canada as well as the unlimited number of cattle it can send to those countries. He also worries that changes to NAFTA could disrupt the North American supply chain. “When that happens, it causes more instability in beef production, and that could have a negative impact on cattle prices,” he said. “We don’t stand to gain a lot by getting out of NAFTA.”

Hoyt Bleakley, an associate professor of economics at the University of Michigan, says all the players in U.S. ag will feel the effects of a downward spiraling trade relationship with Mexico. “It’s hard to say who is not exposed to this,” Bleakley said. “Maybe a place that exports raw materials to Asia? The Pacific Northwest, their logging exports to Japan or China—that’s not affected by the relationship with Mexico. But everywhere else, there’s something.”

Fewer, More Expensive Fruits and Vegetables

Photo: Christina Cooke

Consumers in the United States are accustomed to eating bananas, avocados, strawberries, and other fresh produce grown in Mexico and other Central and South American countries, even during the winter months.

Miles Reiter, chairman of Driscoll’s berry company, said he supports updating the 23-year-old NAFTA to suit present-day trading activity, but finds the idea of adding a tariff to Mexican imports extremely misguided. “If you really look at the data on trade, and even on manufacturing, it’s a very simplistic view that’s driving all this conversation,” he said.

The farms growing Driscoll’s proprietary varieties of berries are located on both sides of the border—in the Baja Peninsula and central highlands of Mexico and in U.S. states including California, Florida, and Georgia. The company imports about 8,000 loads of berries its Mexican growers produce each year, in part to supply American consumers with berries through the cold season. (One load is about 2,500 crates of strawberries and 5,000 crates of raspberries.)

“The 35 percent tariff [the Trump Administration] talked about, that would end things,” Reiter said. “It wouldn’t mean the berries would [then only] come from the United States; it would mean there’d be less of them, and they’d be more expensive.” A 20 percent tariff would also shrink the supply, though slightly less, and Reiter expects the price of winter berries would increase by 25 or 30 cents per clamshell container—perhaps not by the full percentage of the tariff, but close.

Don Cameron manages the more than 6,000-acre Terranova Ranch in the San Joaquin Valley of California, an operation that grows 25 crops, including peppers, carrots, organic broccoli, tomatoes, wine grapes, watermelon, and various types of greens and nuts. He also thinks taxing Mexico’s imports will jeopardize the livelihoods of American farmers and the eating habits of American consumers.

Additionally, he pointed out, even with the growing capacity of states like California and Florida, the U.S. does not have the ability to make up for a decline in fresh-fruit imports from Mexico domestically. “Our season ends toward the middle of November,” Cameron said. “We get frost and rain and weather that’s not conducive to growing the warmer [weather] fruits.” Consumers would have to change their eating habits, pay more, and/or learn to do without many types of fresh produce through the winter.

“We’re entering a new world—every day, it’s more chaos,” Cameron said. “But our nature [as farmers] is to be optimistic. That’s why we put seeds in the ground—we expect something will come up six or eight months later.”

Grocery Stores: Hitting Low-Income Consumers Especially Hard

While U.S. trade policies with Mexico will impact the people working the land, they will also affect the people selling the final product—and their patrons as well.

More than half of the fruits and vegetables in the large and vibrant produce section of the independent Compare Foods supermarket in Durham, North Carolina, originated in Mexico. Store manager Ernesto Padilla says if the U.S. taxes Mexican imports, he will likely be forced to raise prices and cause his customers to buy less.

Padilla worries for the food security of his customers, 70 percent of whom are Latino, and many of whom survive on limited incomes. “There are a lot of poor people, and it’s going to be harder for them to buy food at higher prices,” he said.

Meanwhile back at Centro restaurant in Raleigh, Salamanca monitors the administration’s moves toward Mexico and prepares to react—to reconfigure her menu if need be and explain the changes to her customers, who she hopes will understand. “We’ve been holding our breath to see what’s going to happen,” she said. “At first, it felt like we were on a week-to-week basis, but now it feels like a day-to-day conversation.”

Across the food system, farmers, ranchers, restaurateurs, grocers, and consumers find themselves in a similar holding pattern, waiting to see if the administration will provoke a full-on trade war with Mexico—or settle into some type of friendly, mutually beneficial relationship.

Top photo CC-licensed by Laura Billings.

The post The Food and Farm Fallout from a Trade War with Mexico appeared first on Civil Eats.

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