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Tariff threats create factory floor turmoil at US

factories

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US factories fear retaliatory tariffs from Canada and

Mexico

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US equipment makers see supply chain snarls if tariffs hit

key

North American partners

By Timothy Aeppel

Feb 10 (Reuters) - Stephen Bullock's phone rang early

Monday morning last week at his small factory in North Carolina

with an urgent message from his distributor up in Toronto who

was rattled by what looked like an unfolding U.S.-Canada trade

war.

Two of the machines Bullock's company produces - bulky

contraptions used to lay concrete curbs, highway barriers, and

sidewalks - were due to be shipped to Canada in a few weeks. Was

there any way to get the 25,000-pound machines on trucks, like,

today?

"They said get them here as quick as you can," said Bullock,

President of Power Curbers, who scrambled to pull two finished

machines destined for other buyers the next day.

By then, the panic over potential tit-for-tat tariffs

between the two neighbors had subsided - though the trucks

carrying the $350,000 machines still rolled the 700-plus miles

north.

Not even 48 hours after President Donald Trump announced 25%

tariffs on Mexico and Canada to take effect on Tuesday, the

second-term president put the levies on Canada on hold, hours

after unveiling a similar reprieve for Mexico. Canada had vowed

to retaliate with its own levies on an array of U.S. goods,

including orange juice and trucks. Bullock and his sales team

worried his machines would get caught up in the cross-border

spat.

That kind of factory floor turmoil illustrates how tariffs

can swiftly ricochet through economies, in unpredictable and

often costly ways.

Canada is the single-largest U.S. export destination among

countries, with roughly $350 billion of American goods sent

there last year, roughly 17% of total goods exports of just

under $2.1 trillion. Exports to our two bordering neighbors

totals $683.4 billion, according to the U.S. Census Bureau.

Trump, on the campaign trail and in his first weeks in

office, has extolled tariffs as a tool to boost domestic

producers and fill the U.S. Treasury.

And to be sure, some manufacturers love them. Leon Topalian,

CEO of top U.S. steelmaker Nucor ( NUE ) praised Trump's tariff plans in

a brief statement released by the company last weekend. New

tariffs would have boosted steel prices, at least temporarily.

But many other business leaders and groups, including the

U.S. Chamber of Commerce and the National Association of

Manufacturers, said tariffs on goods from Mexico and Canada -

parts of a close-knit North American supply chain - would hurt

many domestic producers. Even companies that sell mostly "Made

in the USA" goods often rely on Canadian and Mexican suppliers

for parts or produce some finished goods there themselves that

they sell back in the U.S.

'DEAL WITH IT'

One big risk is retaliation. When the U.S. slaps tariffs on

imported goods, the targeted countries usually hit back with

their own fees.

President Trump acknowledged last Sunday that his tariffs

may cause "short-term" pain for Americans as global markets

reflected concerns they could slow growth and fuel inflation.

Economists warn a new surge in prices could slow the Federal

Reserve's moves to cut interest rates.

Kip Eideberg, senior vice president of government relations

at the Association of Equipment Manufacturers, noted that 30% of

all the equipment made in the U.S. - everything from tractors to

bulldozers - is exported. Canada is their largest market.

"Equipment manufacturers across the board, across product

segments, are moving equipment up to Canada in anticipation of

these tariffs being levied," he said, referring to both U.S.

tariffs and expected retaliation. The levies could come back

into play in a month if a longer-term deal or another reprieve

is not reached.

Eideberg said that while there's heavy focus on the auto

industry, it's not unusual for parts or materials in his

industry to move across a North American border five times as it

goes through the production process.

Some domestic producers are resigned to rolling with the

volatility of tariff threats, even when they know they may be

hit. Speaking to investors in late January, Caterpillar ( CAT ) CEO Jim

Umpleby said: "We've been around a hundred years, and we've seen

many different administrations with different attitudes on these

issues (tariffs) - and we'll deal with it."

Jochen Zeitz, CEO of Harley Davidson ( HOG ), struck a similar tone

in an investor call last week, noting their manufacturing is

concentrated in the U.S. and even their sourcing of parts is

"U.S. centric." Even so, motorcycles were on the list of

products Canada planned to hit with retaliatory tariffs.

CLOUDING THE OUTLOOK

Some companies that stand to benefit from tariffs say

they're seeing gains even before the new taxes are implemented,

as customers increasingly look for ways to minimize their

exposure. For instance, Kaysun, a small maker of high-tech

plastic parts used in medical, industrial, automotive, and

consumer products in Manitowoc, Wisconsin, has seen more

interest from prospects looking to buy American.

Ben Harrison, the company's CEO, said he got a visit from a

company two weeks ago that currently has parts made in Mexico

and Asia. "They're looking to start bringing in products from

those countries because of higher costs," he said.

Tariffs did go up this week by 10% on U.S. imports from China,

which hasn't yet forged an agreement to postpone the taxes.

Back at Power Curbers, CEO Bullock said he's continuing to

plan for tariffs on more countries and regions, including the

European Union, another big market for his machines. The

company, which employs about 125 workers, exports to over 100

countries. Canada is its largest foreign market.

He would like to rush more goods north now, he said, but his

assembly line is constrained by the availability of parts and

the need for additional workers. To get more goods to Canada, he

said, he'll need to juggle production schedules to see if he can

postpone shipments to some domestic buyers to free up supply.

Until recently, this was shaping up to be a good year.

Bullock had projected business would grow about 10% in 2025 and

had planned to expand production in April by hiring an

additional half dozen workers.

Tariffs have cast a shadow on that. "We can't make that kind

of long-term decision," he said, "until we see how this all

plays out."