Tariffs have fluctuated in recent weeks during the ongoing trade war, despite the United States recently establishing trade agreements with two of its largest trading partners, the United Kingdom and China. The steel industry is yet another significant North Carolina industry feeling the effects.
“China is different,” said Howard Woltz III, president and CEO of Insteel Industries Inc. “China is almost solely responsible for the sad state of affairs that exists in the steel industry worldwide. That’s because China exports more steel than the US, the entire size of the US market, and they export it at ever-lower prices. There is no price low enough because those companies aren’t forced to make a profit.”
InSteel Industries is headquartered in Mount Airy, North Carolina, but has 10 plants across the United States. The company manufactures infrastructure and construction products, including French beams and foundations.
“Out of sight, out of mind; the average person wouldn’t really understand what we do. But it’s essential reinforcement for anything constructed out of concrete,” said Woltz. “The reason managed trade doesn’t work is that there’s no one smart enough to manage it.”
During a recent panel discussion on tariffs with local experts and business leaders, Woltz noted that several panelists expressed concerns that China’s approach to tariffs is different from the US’s regarding its impact and role in trade.
Woltz explained the impact of the fluctuating tariff situation on InSteel. Most of the company’s capital equipment comes from abroad and thereby has the potential to be subject to tariffs. Woltz described the nightmare that has ensued in recent weeks as trying to understand the magnitude of the impact and which tariffs apply to them and which ones don’t.
Additionally, Woltz explained that InSteel had made commitments, but that the industry had been uncertain because of the tariff turmoil. Machinery and parts had been ordered, but the cost of goods was suddenly unknown.
“That’s just not the way to run a business,” said Woltz.
Steel is not the only industry that has experienced uncertainty due to tariffs and the ensuing trade war. Many manufacturers, including electronics and textiles, have echoed similar sentiments about uncertainty regarding the price of goods. Woltz explained that the 25% steel tariff was reimposed on Mexico and Canada.
“That’s significant, and that’s what caused us to go to Algeria,” said Woltz. “The uncertainty that was created was not helping.”
He explained that InSteel had three different supplies shut down due to the adverse economics of its operations. At this point, the company turned to Canada as a supplier until the steel tariffs were reimposed, at which point InSteel turned to Algeria as a supplier.
“Help me understand whose interest is served by my company going to Algeria rather than Canada; it’s nonsense.”
Howard Woltz III, president and CEO of InSteel Industries Inc.
During a recent panel discussion on tariffs, Rodney Pitts, chairman of the John Locke Foundation’s Board of Directors and formerly chairman and CEO of Southern Elevator, noted that businesses will make zero investments in the face of so much uncertainty. Woltz pointed out that this is exactly right.
“There are certain commitments we can’t back out of, but we’re not going to do anything new.”
Howard Woltz III, president and CEO of InSteel Industries Inc.
“China is the root of the problem,” said Woltz. He explained that they are deeply entrenched in the international trade market because they invest in steel capacities worldwide, in the US, Africa, and Europe.
“Solving a problem within China’s continental border isn’t really solving the problem,” said Woltz. “There’s no solution there.”
He explained that certain business decisions are discretionary, such as expansion or replacing equipment, where businesses can decide whether carrying the tariff’s impact is an economical choice for the company. Other decisions are not optional, such as the purchase of spare parts. Woltz noted that such non-negotiable purchases under the current administration are going to increase for the business.
“I don’t know where this fantasy comes from that the purchaser of a product pays the tariff in the store, but that’s just completely not the case,” said Woltz.
Woltz explained that in 2018 when the tariffs hit, offshore products were not the only commodities that rose in price. All prices rose to the point where both offshore and domestic are still competitive, but they are twice as competitive as before.
“In my business worldwide, China is the problem,” concluded Woltz. “I don’t know what to do about China, but the genie is out of the bottle. And the Chinese influence is now worldwide. It’s not contained in their borders; it’s everywhere. They have a mercantilist approach and frame of mind, which will be an issue for a long time.”