Brice Wallace
Salt Lake Business Journal
If April 2 was "Liberation Day," Utah economy-watchers were in no mood to celebrate.
Representatives of World Trade Center Utah made clear during a webinar that day that the impacts of new tariffs announced by President Donald Trump could be deep and broad for Utah companies of all sizes.
"Who knows what new tariff is coming? I can't tell you. I don't think anybody can. I don't think anybody knows until the president utters the words, because they just seem to happen rather quickly," Wayne Coleman, administrator of the Foreign Trade Zone program for World Trade Center Utah, told the webinar audience. "So, we're all left scrambling, with a great deal of uncertainty. And, as we all know, uncertainty is just the death knell of growth in business."
Coleman noted that Trump, who coined the "Liberation Day" label, is using his tariff authority "quite liberally, on a regular basis," using tariffs to influence foreign policy and trading behavior of the U.S. and its partners. He acknowledged a trade imbalance but said the president is using a proverbial sledgehammer rather than a scalpel to address it.
"Just about every aspect of manufacturing is going to be touched by this," Coleman said. "So many manufacturers import at least some part of the components they need to manufacture their final products that are sold in the United States."
But the impacts of tariffs have not yet filtered down into the trade process, he added.
"But we will see it," Coleman said, "and that is the 'pain' that we occasionally hear the president talk about that we're all going to have to experience before we apparently enter into this new "promised land' on the other side, where manufacturing is back and prices go back down and we source things locally, in the sense of "locally' being the United States and not overseas partners as much. It remains to be seen whether this will be effective or not.
"I think we'll know a lot after the summer, because it's going to take a while for this to happen," he said.
Coleman is hoping federal officials and agencies will work to establish some relief for the tariff impacts.
"Otherwise, I do believe we're going to see a higher-than-normal level of business failures because of this," he said. "To go to a business and immediately say, "Everything just went up 20 percent,' I mean, that's putting a gun to their head."
From the beginning, the tariff situation has been fluid, with the president threatening or implementing targeted tariffs against some nations and broad or reciprocal tariffs against others, with industries and companies having to respond to an on-again/off-again/pause again, tit-for-tat cycle.
To aid Utah companies, World Trade Center Utah has a web page devoted to tariffs that will be updated at least weekly. The page, https://www.wtcutah.com/tariffs, lists tariff actions, their effective dates, impacted countries, the tariff type and rate, the targeted goods and available resources for more information.
At least one analysis has estimated new-tariff impacts of close to $3.1 billion in Utah, which imported $21.9 billion worth of goods last year.
"[At] World Trade Center Utah, I think we joke around that about 22 hours of our day is the "T' word," Matt Wunderli, director of business development at WTC Utah, said of tariffs. "And we're trying our best to navigate. Every hour, there's something new happening with the Trump administration, it seems like."
He said nearly every company is already involved in international business and thus facing tariff impacts. "Whether you're importing or sourcing from overseas, from other countries, you're already doing something internationally," Wunderli said.
WTC Utah also is trying to get the word out about the Foreign Trade Zone program, with details at its website. FTZs are locations in or near a U.S. Customs port of entry where foreign and domestic merchandise is generally considered to be in international commerce and outside of U.S. Customs territory. Activated businesses in an FTZ can reduce or eliminate duties on imports and take advantage of other benefits to encourage foreign commerce within the United States. Certain types of merchandise can be imported into a zone without going through formal Customs entry procedures or paying import duties. Customs duties and excise taxes are due only at the time of transfer from the FTZ for U.S. consumption. If the merchandise is exported and thus never enters the U.S. commerce system, no duties or taxes are paid on those items.
The local FTZ area covers about 60 miles geographic distance or 90 minutes' drive time distance from Salt Lake City International Airport.
However, Coleman noted, an FTZ takes about six months to establish, "so it's not a silver bullet for most of these companies that are getting hit immediately or within a week of tariffs."
"The problem is, small and medium-size companies, they just don't have the depth to absorb those sorts of price increases that happen that rapidly," he said.
Jay Francis, president and CEO of the South Valley Chamber of Commerce, said he has fielded questions about whether the tariffs are part of a "chess game." Some economists and analysts have suggested the president will use the threat of tariffs to negotiate individual trade deals with partners. Others, however, see Trump as a true believer that tariffs can benefit the U.S.
"President Trump was a businessman," Francis said. "He understands what tariffs are going to do to the cost of business."
Coleman said Trump already used threats against Canada and Mexico to get certain concessions.
"I do believe that the "pain' that they referenced that we will have to go through is baked into this strategy, and, unfortunately, they're willing to let some businesses fail, maybe partly for the purpose to illustrate what's going on in terms of the imbalances in trade and why people need to start getting on board and moving things back to this country," he said.
On the plus side, some U.S. and foreign companies have been investing in reshoring operations to the U.S.
"There may be positive outcomes of this, but I believe there's going to be a lot of pain for small and medium-sized businesses," Coleman said, "and I think it's important that an effort be made to try to save that from happening. It doesn't have to happen, but I'm afraid that it is."
Displaying gallows humor, webinar presenters sarcastically signed off with "Happy Liberation Day!"