Greg Clement on Tariffs, Trade and Wisconsin Manufacturing

Frederica Freyberg:
Manufacturing is big business in Wisconsin. We’re in the top ten states nationally with the second highest concentration of employees in the sector. The industrial machinery sector is Wisconsin’s largest. So what do the 25% tariffs on Canada and Mexico steel and aluminum mean for companies like Argon Industries, which fabricates sheet metal components for major companies and imports 70% of its aluminum from Canada? We ask owner Greg Clement. Thanks very much for being here.

Greg Clement:
Yeah. Good morning.

Frederica Freyberg:
So what has been the immediate impact of the tariffs, especially for a company like yours that imports 70% of the aluminum from Canada?

Greg Clement:
So all our suppliers are getting the material from Canada. And what’s happening is the aluminum has gone up 30%. Stainless steel has gone up 100% and hot rolled, cold rolled are averaging 30% increases. And that, that is a huge burden. That’s just from January to March.

Frederica Freyberg:
So do you continue to buy from Canada or are you trying to buy domestically or would that make a difference?

Greg Clement:
The 70 — like you said, 70% of the aluminum comes from Canada. You really don’t have a lot of other resources. And you know, we don’t buy from Europe or China.

Frederica Freyberg:
And so if the, if the prices for that metal, those metals, has gone up to that extent, what does it mean for you and your business?

Greg Clement:
So luckily, most of our customers understand that materials are a pass through. So we’re able to requote it and raise the pricing. But it typically will delay and cause them not to order as much as they had planned because of the expense of the material and the cost of the material, and what it does for their end costs.

Frederica Freyberg:
And so if their end costs go up to that extent, what does that mean downstream for consumers?

Greg Clement:
So it’s a tax on the consumers. They’re going to pass it along and they’re not going to hold the pricing. And you know, the consumer is going to pay the tax. It’s — on average, consumers will pay $3,000 in result of the tariffs per year.

Frederica Freyberg:
So we see you there sitting inside your operation. What are the applications for your sheet metal fabrications and what kinds of industries and products?

Greg Clement:
Yeah, power generation, dehumidification, scaffolding, a lot of different — electrical enclosures, controls, things of that nature.

Frederica Freyberg:
And so again, your customers are willing to pay more?

Greg Clement:
They don’t want to, but they understand that that we can’t afford to, you know, swallow that kind of increase and that we would just lose margin.

Frederica Freyberg:
And so what does that do in your mind to kind of the broader economy, right, if consumers are going to pay an extra $3,000 and your customers might be pulling back on how much they buy, you know, what kind of effect does that have?

Greg Clement:
Yeah, I mean, it’s raising inflation on the consumer. And it will slow the economy down temporarily. We’re hoping that he could, you know, solve these issues and not have the tariffs but the problem is we don’t manufacture aluminum here. So we have to buy outside. So for me the tariffs on something that we can’t even manufacture and then put that burden on the consumer is wrong.

Frederica Freyberg:
So as to the domestic production of aluminum, that would seem to be what President Trump and his administration wants as a result of these tariffs. But how likely is it that the U.S. could ramp that up?

Greg Clement:
To build a mill, especially aluminum mill, is very costly and would take a long time. I mean, you’re talking he’d be out of the office by the time anything came online.

Frederica Freyberg:
So the fed is signaling about an economic slowdown, possibly a recession on top of everything that’s happening now. How concerning is that?

Greg Clement:
It’s very concerning. We’re going to have a record year this year. Based on our customers’ excitement, forecasts, and they’re all growing. And this could, this could stop that growth.

Frederica Freyberg:
What is your message then to the administration?

Greg Clement:
To — let’s not tariff something that we can’t produce in the United States. Let’s not add burden. He’s talking about cars and even — aluminum goes everywhere. And it’s just going to increase costs for everyone. And then we are going to have to pay that 25%.

Frederica Freyberg:
Do you feel as though that message is being heard?

Greg Clement:
I don’t think it is. I think he has a different end game, and it would be nice to know what his end game is, because the other thing — to have uncertainty on tariffs creates uncertainty on customers’ buying. If you don’t have certainty of the industry of what you’re doing, they’re going to, they’re going to wait and delay.

Frederica Freyberg:
Well, we will see how this goes and we wish you luck. And thanks very much for joining us.

Greg Clement:
Thank you for having me.