The topic of tariffs continues to be on the minds of Utahns. At two recent events, miles apart, on the same day, one common thread was speakers worrying that the Trump administration’s tariff and trade war approach could needlessly hurt the booming U.S. and Utah economies.
At the Southwest Salt Lake County Economic Summit, Robert Spendlove, senior vice president and economic and public policy officer at Zions Bank, discussed elements of what he called the “Trumpenomic agenda,” including tariffs.
“One of the areas that I’m really concerned about is the president’s actions on tariffs and international trade, and it’s one of the biggest ‘black swans’ — one of those areas that could just blow up everything,” Spendlove said.
That “everything” includes a national economy in its 110th month of economic recovery, the second-longest such period ever; job growth; a low unemployment rate and slowly rising wages. Locally, Utah has the nation’s fastest employment growth, the 12th-lowest unemployment rate and the third-highest personal income growth rate.
And retaliatory tariffs could derail those, he said.
“We’re seeing these retaliations, we’re seeing these increasing commodity prices, we’re seeing distortions in the agricultural sector, and if the president is successful, it could be very positive long term, but it’s a real challenge and it’s something I’m really worried about,” Spendlove said.
“And the downside risks are huge. It’s one of the biggest concerns among individuals … that the worry is increasing over time and it could have a devasting impact. The trade war alone could push us into a recession in the next little while.”
Utah’s current inflation rate of 5.4 percent is its highest ever, he said, with a major factor being high housing costs. The number of Utah housing units being built is unable to keep pace with the growth in the number of households being created, leading to those higher costs.
“Input prices are going way up because of the tariffs. Lumber prices are up, steel prices are up. The inputs into construction are becoming more expensive,” Spendlove said.
He recalled a recent chat with a homebuilder. “And he said, ‘We can’t afford to build the houses that people can buy.’ Because of their input prices, they have to build more-expensive homes, but the first-time or the lower-income homebuyers can’t afford those more-expensive homes.
“I would say we’ve got to be sending the message to Washington to resist some of these protectionist tariffs that are hurting our overall economy.”
Tariff talk popped up also at Product PowerUp, a gathering of people focused on the design, development, sourcing, manufacturing, sales, marketing, warehousing and logistics of products.
Todd Bingham, president and CEO of the Utah Manufacturers Association, said during a panel session about supply chain that pinpointing products for tariff application can be tricky.
“I think there’s an assumption sometimes from the public, maybe even from our commander-in-chief, that every piece of every product is manufactured here in the United States, and that’s just simply not true,” Bingham said. “Component parts and pieces come from all over the world.
“We have a significant number of companies here in Utah that manufacture component parts and pieces in Mexico and then cross the border. That is what’s making the trade war so complicated. … It’s very complex and, again, if you’re manufacturing a widget that starts here in the United States and finishes in the United States, then perhaps you’re not as deeply impacted, but that’s very rare today. It’s extremely rare that a manufactured part starts like that.”
The association’s work includes helping companies find manufacturers that can make the products they need, especially if they are looking for local sources. “We assisted several companies in Utah with bringing some projects back from overseas to do them here in Utah,” he said. “Unfortunately, now some of the tariffs and trade war discussion is starting to push some of those projects back overseas again.”
Say “tariffs” and “China” is what comes to many people’s minds. China was mentioned several times during the panel discussion. But Brian Sather, CEO at Blacksmith International, which helps companies with product sourcing, said many myths exist about “what the Chinese are going to do with your product.”
“Everybody talks about IP theft and quality issues and all that,” he said. “China is not a country full of factories who want to do that to your product. China is full of factories that want to really help get you a really good product at a good price and they want to form a long-term relationship, and that is a difficult thing, I think, sometimes for Americans to wrap their head around.”
While he said he once thought that the migration of manufacturing to China was strictly about pricing, he said he has come to realize that Asia has a very developed and integrated supply chain, short lead times, efficiencies and a wider selection of materials from which to choose.
“I think the trade war is here,” Sather said. “I think it’s going to affect manufacturing’s approach going forward.”
Sather predicted that marketplace changes will be the major determinant in whether manufacturing will return to the U.S.
“For me, all cards on the table, I don’t care where something is manufactured. I don’t care if it’s here, I don’t care if it’s in Asia — wherever. What I care about is the clients get what they need when they need it. Now, if it is here and it’s in our own backyard, and we’re employing people, that is all the better, right? But it’s like icing; it’s not the cake, for me,” he said.
“We see the marketplace changing. We see that there is a wave of manufacturing coming that I don’t think Asia is going to be as competitive with. There are these changes coming where you can’t throw cheap labor at the problem. You’ve got to throw technology at it. You’ve got to be efficient. You’ve got to be able to do small runs. You’ve got to be able to get a product to market in six weeks versus six months or seven months or whatever it might be. And those are the types of economic drivers that I think are going to start pulling manufacturing back to the U.S. more than anything.”
Peter Ransom, a partner at Stak Product Services, involved in new-product development and as a manufacturing agent in China, said China is growing quickly, its people are hard workers “and it’s a force to be reckoned with. It’s not going away.”
But he sounded as if he prefers cooperation and collaboration over the conflict that prompts tariffs. Ransom said he is encouraged by Utah youngsters being in Chinese immersion programs and with Utahns wanting to reach out and connect in China with the Chinese.
“I think it’s in the future of anybody that’s here, in some way or another, who is going to work with Chinese people and China. I think it’s amazing.”
“Embrace it,” Bingham quickly added. “Don’t create more tariffs.”