Thursday, 3 May 2018

Tariff Impact Colors a Key House Race in Boeing Country

Tariff Impact Colors a Key House Race in Boeing Country
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The district’s quirky boundary, which encompasses the vast airplane-making ecosystem to the west and thousands of acres of cherry and apple farms on the other side of the Cascade Mountains, makes the territory uniquely vulnerable to the president’s actions on trade. Boeing is probably the American company with the most riding on a healthy relationship with Beijing.

China is projected to buy more than 7,000 planes worth almost $1 trillion in the next 20 years, more than Boeing’s current backlog for the entire world. Most commercial aircraft in China are made by Boeing, the company says, but if the trade pressures escalate, China could choose to award more work to Europe’s Airbus.

For now, Beijing has threatened to retaliate with tariffs on some airplanes, including older 737 models made in the Renton factory where Mr. Cesmat works, which is just outside the district.

“China knew exactly where to target,” said Kim Schrier, the Democratic candidate who has built the biggest campaign war chest ahead of the Aug. 7 primary. “They’re targeting districts where this could be problematic for Republicans.”

Ms. Schrier is among half a dozen or so Democrats gunning for a seat that became catnip for the party the moment that the seven-term Republican incumbent, Dave Reichert, announced his retirement in September. Despite Mr. Reichert’s success, the district favored Hillary Clinton by three percentage points over Mr. Trump, and it went twice for Barack Obama. Ms. Schrier, a pediatrician and first-time candidate, has been hammering Dino Rossi, the likely Republican nominee, on the tariff issue.


“These tariffs are a direct response to the policies of a president you helped elect. Don’t you have anything to say?” she tweeted to Mr. Rossi last month.


Mr. Rossi, a former state senator, is careful to note that the bluster could be part of Mr. Trump’s negotiating style. But he said he understood why everyone was so worried. “You really can’t get down to a trade war. In the end it will be very disruptive,” he said in an interview. “Hopefully this is more posturing than anything.”


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Schilling Cider has grown quickly since it was founded five years ago. But with tariffs raising the cost of aluminum, it may have to pay $100,000 a year more for cans.

Credit
Kyle Johnson for The New York Times



But voters in the district say the escalating trade drama has already begun to complicate their daily lives. Companies that supply construction materials have suspended orders, waiting to see what happens to metal prices. Employees at a builder of truck components say managers have been hastily reassessing supply chains that run through China and Mexico. A local hard-cider brewer is reconsidering an expansion after the steel and aluminum tariffs made new tanks and cans more expensive.

And at Boeing, a company that employs grandfathers next to granddaughters and has introduced generations of Washingtonians to their spouses, the unease has been evident from the executive suite to the factory floor.

Mr. Trump’s hard line on trade didn’t used to inspire so much teeth-grinding among Boeing workers. A lot of union mechanics were happy last year when he pulled out of the Trans-Pacific Partnership, which would have reinforced the nation’s embrace of free trade. And the president earned a lot of fans in Washington when he criticized the company on the campaign trail in 2015 for setting up a new plant outside Shanghai, saying it would “end up taking a tremendous number of jobs away from the United States.”



Jim McKenzie, a union machinery repairman, remembered that comment when, several months ago, he came across a package of dorsal-fin parts at the Boeing plant in Auburn where he works. Mr. McKenzie pulled back the Bubble Wrap and saw a label that made him feel as if he were sinking into quicksand: Boeing China.

“We drill it and assemble it, but they ship the parts in from China,” Mr. McKenzie said. “There are people who have worked here for 25 years making those parts, and they’re proud of that.”

But Mr. McKenzie, 56, isn’t eager to blow up the Beijing relationship. “China will just buy all their planes from Airbus,” he said, leaning his chair back against a wall in the machinists’ union hall in Auburn.

He doesn’t have much hope that Mr. Trump will do anything to stop Boeing from setting up shop in China — he saw how Carrier shipped work from Indianapolis to Mexico even though the president had railed against the move. In Boeing’s case, Mr. McKenzie said, hiring some Chinese workers might be unavoidable. “You have to provide them jobs to sell them airplanes,” he said.


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“Stirring the pot unnecessarily doesn’t help business whatsoever,” Mark Kornei, a co-founder of Schilling Cider, said of President Trump’s trade moves. “Give us a steady set of rules.”

Credit
Kyle Johnson for The New York Times



Ms. Schrier recently won the endorsement of the machinists’ union, which represents more than 26,000 Boeing workers. Mr. Cesmat, 27, plans to volunteer for her campaign. “She pledged to support our jobs,” he said.


Boeing’s “super PAC” donated $2,000 to Mr. Reichert’s campaign, but hasn’t contributed to any candidates vying to succeed him, according to the Center for Responsive Politics, a nonpartisan research group. It did donate $8,000 to Cathy McMorris Rodgers, who is facing a strong Democratic challenge in her quest for re-election in Washington’s Fifth District.

The fear over trade tensions has spread beyond Boeing’s hulking factories, all the way to Schilling Cider, a hard-cider company founded here five years ago by two friends, Mark Kornei and Colin Schilling. The business grew quickly, thanks in part to the state’s abundant apple orchards, but now it’s staring down an uncomfortable new reality.

The company that sells Mr. Kornei stainless-steel tanks told him recently that prices for its raw materials might rise by 20 percent. A single tank costs around $50,000. He has also heard from the manufacturer of his aluminum cans that prices could increase by 10 percent. Mr. Kornei will buy 11 million of them this year, so that uptick alone could cost him more than $100,000, he said.

“Stirring the pot unnecessarily doesn’t help business whatsoever,” Mr. Kornei said. “Give us a steady set of rules so we can figure out what we are going to do.”

Mr. Rossi acknowledged that some of what the president says and does “can at times” make it harder for him on the campaign trail. But he has raised more than $2 million, about twice as much as Ms. Schrier.

The Republican tax cuts are a big selling point for Mr. Rossi, who has a ready figure for exactly how much a typical household will save because of the law (“$3,357 — that’s real money”). He’s also counting on a personal bond with Republican voters east of the Cascades.

“I have a connection with folks that certainly precedes the president,” Mr. Rossi said. He was referring to his campaigns for the governorship in 2004 and 2008, the first of which he lost by fewer than 200 votes in a third recount. “They know I’ll advocate for trade,” he said. “They know me.”


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Wednesday, 2 May 2018

The U.S. Says It Has a Tariff Deal With Brazil. Brazil Disagrees.

The U.S. Says It Has a Tariff Deal With Brazil. Brazil Disagrees.
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SÃO PAULO, Brazil — From the perspective of the White House, the United States had negotiated a preliminary deal with Brazil, as well as Argentina and Australia, to exempt the countries from punitive steel and aluminum tariffs.

From the perspective of Brazil, it was issued an ultimatum.

Brazil accused the Trump administration on Wednesday of breaking off negotiations over the tariffs last week and issuing a take-it-or-leave-it offer. According to the Brazilian authorities, the United States said the country’s steel and aluminum industries could opt for tariffs or quotas.

That account appears to contradict the White House’s version of the events. On Monday, White House officials said they had reached agreements in principle with Argentina, Australia and Brazil with regard to steel and aluminum, saying the details would “be finalized shortly.”

The disconnect between the United States and Brazil echoes the broader state of the trade negotiations, which have been clouded by confusion, miscommunication and a general state of uncertainty over the rules of engagement.

When President Trump issued the worldwide tariffs in March, he granted temporary exemptions to Brazil, Argentina, Australia, Canada, the European Union, Mexico and South Korea. Almost immediately, countries scrambled to make them permanent.

Just hours before those exemptions were set to expire, the Trump administration extended the deadline for the European Union, Canada and Mexico. It also said Brazil, along with Argentina and Australia, were finalizing the details of “satisfactory alternative means” to address national security threats posed by steel imports and avoid tariffs. (South Korea had previously reached an agreement as part of a broader trade deal.)

Apparently, Brazil wasn’t exactly on board.

In a joint statement on Wednesday, Brazil’s foreign and trade ministers said they were informed of the decision by the United States to break off negotiations last Thursday. They were then told that the temporarily suspended tariffs would be applied “immediately” or, as an alternative, they could opt for “restrictive unilateral quotas.”

The White House did not immediately respond to a request for comment.

The president of the Brazil Steel Institute, Marco Polo de Mello Lopes, who was meeting with Brazilian officials when they got the call from Washington, said the ultimatum came as a complete surprise.

“They said the decision was made on the eve of a presidential meeting, that the political conditions had changed, and there were no longer the conditions to keep negotiating as we had been,” Mr. Lopes said in a conference call with journalists on Wednesday. “Take it or leave it isn’t the way you treat a partner.”

In the statement, Brazil said that if it ultimately had to choose, its aluminum industry would prefer the 10 percent tariffs on its exports to the United States while its steel business favored import quotas to the 25 percent tariffs. But the Brazilian authorities said they would like to keep negotiating.

Brazil has argued that 80 percent of its steel exports to the United States are semifinished products used in the steel industry and therefore do not pose a threat. Officials have also noted that Brazil is the largest importer of American metallurgical coal, worth about $1 billion in 2017, which is used in Brazil’s steel industry.

Days before talks were broken off, Thomaz Zanotto, a consultant for Brazil’s second-biggest steel company, CSN, who had been kept abreast of negotiations, said it appeared that Brazil might have to face quotas on finished products, which represent 20 percent of exports to the United States. But they believed at the time the rest would be exempt.

Mr. Lopes said the quotas being offered by the United States in lieu of tariffs would mean a 7.4 percent reduction in the exports of semi-finished steel products and a drop of between 20 percent and 60 percent in exports of finished goods, depending on the product.

In its statement, Brazil said the United States would be solely responsible for putting the measures in place. The ministers “lamented that the negotiating process had been broken” but said they were open to “building solutions that are reasonable for both parts.”

Ana Swanson contributed reporting from Washington.



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