N.H. Manufacturer Says Trump's New Tariff Could Negatively Affect Business

Mar 8, 2018

Graphicast manufactures zinc and aluminum based alloy parts. CEO Val Zanchuck says President Trump's proposed tariffs could affect his business if it includes raw materials.
Credit Todd Bookman / NHPR

President Donald Trump announced this week his plan to impose stiff tariffs on steel and aluminum imports. Gov. Chris Sununu joined many federal government officials in opposing the plan.

Val Zanchuck is the CEO of Graphicast, a manufacturing company in Jaffrey. Morning Edition Host Rick Ganley spoke with Zanchuck about how the proposed tariffs could affect his business.


(Editor's note: this transcript has been edited lightly for clarity.)

First, tell us just a little bit about your company, Graphicast, and what you produce. I know your customers include some big name firms like G.E. and Johnson & Johnson.

That's correct. So we are what would be classified as a contract manufacturer or a job shop. So we have a process here of a foundry where we melt metal and cast it into shapes in a machine shop that takes those castings and does finish machining on them. And we operate at the pleasure of our customers. So if they need parts they order them from us, and that keeps us afloat for just coming up on 40 years.

So what was your reaction when you heard about these proposed tariffs?

Well, I thought it was stupid. It seemed very much like a knee jerk reaction to a problem that was certainly not well defined. And I think the imposition of such a broad tariff on fundamental materials like steel and aluminum have all types of ramifications, not only to those particular industries that produce those products, but the much larger part of the economy that consumes those products, and then the repercussions that happen when countries affected by this impose tariffs on something from the United States.

So what do you think would be the impact on your business in particular if these tariffs are imposed?

Well, I guess at this point it's unknown, because I don't know and maybe others don't know exactly what products are going to be impacted here. If it's finished goods like sheet steel, or finished construction, or products like beams and whatever, it's not going to have much of an impact on us. If it's a tariff on the material all the way down to the raw material side, then it will have some impact because our raw material is a zinc-aluminum-based alloy. So if the price of aluminum goes up, the price of our alloy goes up. And it's already been going up dramatically. It's been up 25 percent this past year. And of course we've had to try to pass that material increase onto our customers. And when you get a call from a customer and they say why'd my price go up a dollar, it's the raw material went up a dollar and we're just passing it through. You know that goes on for so long, and then they say well maybe we'll go with a different material, or a different process if things are getting too expensive. So to artificially impose this tariff on what is one of our raw materials could have a material impact on our business and our ability to continue to pass these price increases along to our customers.

And of course a dollar here, a dollar there when you're talking about tonnage of material adds up very quickly.

Right. If the tariffs are broadly applied and all that imported steel goes up in price, then our domestic suppliers are going to raise their prices just to below what the tariff rate is. And you know they'll do better, but everyone else that uses steel, which is a much larger market than those who produce it, are going to pay the price.

You must talk to other companies you work with, clients and so on. Is there talk about this and what it can mean in the future?

Well, I was just talking to a friend of mine who runs a business in Nashua. And they're buying $400,000 a year worth of steel. I mean that is their raw material, and they're in a very competitive business. So if they're looking at a tariff, and all of a sudden they're adding $100,000 to the cost of their raw material, they can absorb some of it, but they're probably going to have to try to pass it along. And it's just a huge, huge impact for them. You know a lot of people are saying well maybe things are going to slow down a little in the next year or two. We may go through a recession. There have been other indicators that a lot of the manufacturers are beginning to see that would indicate a slowdown. So now you have a situation where your raw material costs are going up and your business is going down. And that's not a good combination.

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