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Missouri manufacturer struggles with tariffs

July 6, 2018

POPLAR BLUFF, Mo. (AP) — On one of the sprawling factory floors at Mid Continent Nail Corp., amid the crushing heat and deafening noise of the machines, towers of coiled steel maybe 3 feet wide and 8 or 9 feet tall stand in clusters around the room like a metallic forest.

That steel is the problem. The raw material for the nails comes from Mexico and, due to new tariffs imposed against that country by President Donald Trump’s administration, it now costs the company 25 percent more than it did before June 1. That has translated into higher nail prices, lost customers and 60 recent layoffs, with potentially hundreds more lost jobs to follow.

“We’re making decisions one day at a time,” Chris Pratt, operations general manager for the plant, said during a tour of the facility Democratic state Sen. Claire McCaskill and reporters. “We just need relief as quick as possible. Every day it’s a financial burden. ... We’re paying workers that are not able to produce because we’ve shut 50 percent of our production down because of lack of orders.”

For Poplar Bluff, a poverty-wracked town of 17,000 deep in southeastern Missouri, this wasn’t how Trump’s economic cavalry was supposed to arrive.

In the 2016 election, Trump won surrounding Butler County with almost 80 percent of the vote; Hillary Clinton didn’t break 18 percent. Trump’s promise to “Make America Great Again” hit home for many in a town whose empty downtown storefronts stand as mocking relics of better times.

About a quarter of the area’s residents live below the poverty level, a receptive audience for a campaign that warned its followers they were being neglected and vowed to fix it. The region’s congressman, Republican Rep. Jason Smith, of Salem, routinely tweets out fervent backing of Trump and his policies — including early support of Trump’s long-promised trade war with the rest of the world.

But instead of providing the economic lift Trump supporters here believed would come from it, that trade war has knocked one of the region’s biggest manufacturers — and the biggest American nail maker in the country — back on its heels.

The company is now begging for the administration to grant an exemption to the tariffs and warning that it could be out of business by Labor Day if it doesn’t.

The tariff policy “has put this company on the brink of extinction,” Mid Continent spokesman James Glassman told a CNN interviewer recently.

Smith is still tweeting out Trump’s praises, but he has gone notably silent on the hundreds of endangered local jobs that community residents and state, national and even international media outlets are writing about.

Smith’s office responded to a St. Louis Post-Dispatch request for an interview with a written statement reiterating Smith’s support for Trump’s trade policies in general, while also supporting the company’s request for an exemption from those policies. Smith wasn’t at the open-press tour of the factory.

“He has been asked to talk about it throughout the district,” said Kathy Ellis, a Democrat from Festus running for Smith’s seat this fall. “He has not, to my knowledge, spoken of it.”

On May 31, Trump announced tariffs on steel and aluminum imports from Canada, Mexico and the European Union. It was the culmination of the trade war he’d been vowing to start since before his 2016 election victory.

“Trade wars are good, and easy to win,” Trump declared earlier this year.

The stated purpose was to protect American manufacturing jobs from foreign competition. But for Mid Continent Nail, it quickly had the opposite effect.

The plant is owned by a Mexico-based company and imports steel from Mexico, which American workers in Poplar Bluff turn into nails. With Mexican steel suddenly 25 percent more expensive due to Trump’s tariffs, the company had to raise the price of its nails, which drove down sales.

Within a few weeks of the start of the tariffs, sales had fallen by 50 percent. Company officials say much of its lost business went to cheaper imported Chinese nails.

“It’s chaotic, and there’s some incompetence involved” in how the tariffs have been implemented, McCaskill told company officials as she toured the plant. “They’re chasing your customers into China’s arms.”

Its profits falling, Mid Continent laid off 60 workers in mid-June. It publicly warned that another 200 of its roughly 500 total employees could go by the end of July. And it opened the possibility of folding completely if something didn’t change.

The company is asking the Commerce Department for an exemption to the tariffs for its supplier, but so are thousands of other companies. Barring that, it says, the plant might relocate to Mexico to escape the effects of the tariffs.

“This company, I think, couldn’t be a better example of the kind of damage that’s being done to America’s manufacturing jobs as a result of this extremely misguided policy,” Glassman, the company spokesman, told CNN last week.

Last year, Smith hailed Trump’s plans to impose new tariffs on imported aluminum, saying it would bolster the struggling aluminum industry in his Eighth District.

“This president is about jobs,” Smith said in a media account at the time. “This president is about the American worker, and what he did today was making sure that we have an aluminum industry in the United States.”

In fact, the aluminum tariff, along with a major change in state utility law, did help restart an aluminum smelter in nearby New Madrid earlier this year, bringing back more than 400 jobs. But the celebration of that success will be short-lived if the trade-off is 500 lost jobs an hour west due to the related steel tariffs.

Smith, in his statement to the Post-Dispatch, lauded Trump’s “continued efforts to negotiate a better deal for the workers, farmers, and families in southern Missouri who have been on an uneven playing field for too long.”

The statement said that Smith had met with the Mid Continent Nail Corp.’s owners and employees and the White House, and that “I think they make a good case for an exemption” from the tariffs. He said he had asked the Commerce Department to expedite the exemption request.

Smith’s office declined to specify whether he supported the steel tariffs in general.

The company — perhaps mindful that tariff problems or no tariff problems, this is still Trump country — ran a full-page ad Friday in the local newspaper, the Daily American Republic, addressing Trump, that begins: “More than any president in our time, you have shown compassion for U.S. manufacturing workers.”

It goes on to ask Trump to “please show your compassion and dedication to U.S. manufacturing and grant us an exclusion” from the tariffs.

Ellis, the Democratic candidate, said she believed the issue could make some in the region rethink their support of Trump and his party.

“People are stunned that this is happening,” she said. “When 60 people in a small town lose their jobs, that’s huge.”

Odds are strongly against Ellis or any Democrat unseating Smith — Republicans historically win the district with about 70 percent of the vote — but she believes disillusionment over the tariffs and other issues could move the needle.

“The Poplar Bluff area is bright red. The strongest Trump supporters are going to go down with the ship,” Ellis predicted. “Others may have buyer’s remorse.”

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Information from: St. Louis Post-Dispatch, http://www.stltoday.com

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