Trump's steel and aluminum tariffs to hit home in Kentucky
A western Kentucky aluminum plant has become the poster child for supporters of President Trump’s decision, but bourbon and other Bluegrass State industries could be harmed.
This story was updated Tuesday to reflect new comments from U.S. Senate Majority Leader Mitch McConnell and Kentucky Gov. Matt Bevin.
LOUISVILLE, Ky. (WDRB) -- A mostly idle aluminum plant in western Kentucky has become the poster child for President Trump’s decision to impose tariffs on imported steel and aluminum.
But Kentucky is home to other industries – from car and appliance manufacturing to bourbon distilling -- that could be harmed by the tariffs, especially if they end up sparking a trade war.
Thus the Bluegrass State, which voted overwhelmingly for Trump in 2016, now becomes a test case for his protectionist policies.
Trump said last week that he would impose tariffs of 25 percent on imported steel and 10 percent on imported aluminum. U.S. producers of those metals say they can’t compete with imports that are subsidized by foreign governments and “dumped” into the market for artificially low prices.
Chicago-based Century Aluminum Inc., which has two plants in Kentucky, has been among the most vocal supporters of Trump’s action.
Once Trump finalizes the tariffs, Century Aluminum will invest $100 million in its aluminum smelter in Hawesville, Ky. and double the plant’s employment by adding about 300 jobs, said Jesse Gary, Century Aluminum’s executive vice president, in an interview Monday.
“We have a lot of faith in this president that he is going to come through for us,” Gary said.
But Kentucky, which punches above its weight in manufacturing, has a lot to lose if goods become more expensive to produce and to export to foreign countries.
“You are talking about a lot of second- and third-round effects, and I am nervous, because we don’t know what that might be,” said Janet Kelly, director of the Urban Studies Institute at the University of Louisville. “… I don’t think you’ll ever find an economist who thinks that tariffs or restrictions on free trade are a nifty idea.”
On Friday, Toyota Motor Corp. said the metal tariffs would increase the prices of cars and trucks sold in America. Toyota’s largest U.S. factory is in Georgetown, Ky., where the Camry sedan is made.
Louisville’s GE Appliances uses a lot of steel in the refrigerators, dishwashers and other household products it makes at Appliance Park in Louisville. Higher steel prices could mean more expensive appliances, reduced production or lower profits.
“We are still evaluating the impact of the new tariffs on our business, quite frankly,” said Bill Good, the executive who oversees manufacturing and logistics for GE Appliances.
But Electrolux, one of GE Appliances’ main competitors, has already promised to delay a $250 million plant expansion in Tennessee if the tariffs go through.
In retaliation to Trump’s move, the European Union has threatened tariffs on bourbon, Kentucky’s $8.5 billion signature industry.
Kentucky’s bourbon trade group said it’s too soon to predict the impact of the tariffs because Trump has not finalized key details -- including which countries, if any, may be exempted.
But Europe and the United States have mutually benefited from freely selling each other’s products for decades, the Kentucky Distillers Association said.
“Any efforts to impose retaliatory tariffs on U.S. spirits exports to the EU will jeopardize this long-standing partnership, harm consumers through higher prices and more limited product availability, and significantly threaten the distilling renaissance that is creating industry jobs and generating billions in capital investment,” Kentucky Distillers Association President Eric Gregory said in a statement Monday.
Kelly, who recently quantified the economic impact of the state’s bourbon industry for the distilling trade group, said retaliatory bourbon tariffs would have an “immediate impact,” while it’s harder to predict how the tariffs would affect industries like car and appliance manufacturing.
Gary, the Century Aluminum executive, said concerns about increased prices are overblown.
A 10 percent increase in aluminum would translate into less than 2 cents per six-pack of soda cans, or about $40 on a new vehicle, he said.
Fellow Republicans don't support Trump’s move
Some of Trump’s fellow Republicans have balked at the tariffs.
U.S. House Speaker Paul Ryan is “extremely worried about the consequences” of the tariffs and is urging the White House “to not advance with this plan,” according to a statement issued by his office Monday.
U.S. Senate Majority Leader Mitch McConnell, R- Kentucky, was also critical of the tariffs in remarks to reporters in Washington on Tuesday.
"There is a lot of concern among Republican senators that this could sort of metastasize into a larger trade war, and many of our members are discussing with the administration just how broad, how sweeping this might be,” McConnell said, according to Politico.
Kentucky Gov. Matt Bevin said Tuesday that the tariffs have costs and benefits, and that it would be "premature" to say whether he supports Trump's move until the policy is finalized.
But Bevin helped Century Aluminum campaign for the tariffs in January by attending a press conference at the Hawesville, Ky. plant.
At the time, Bevin appeared to support the company's position, saying it was “a shame” that the U.S. aluminum industry has hollowed out even as aluminum is used in many products necessary for national defense.
“We expect and hope and ask the president of the United States to realize that the Century Aluminum’s of the world are critical to our nation’s infrastructure,” Bevin said.
On Tuesday, Bevin acknowledged that there are "two sides" to tariffs. While Kentucky companies like Century Aluminum and AK Steel would benefit, others could be hurt, he said.
"It’s good for one part of the production end, but it’s not necessarily good for those who make things out of that raw material," he said.