There is a casualty of Donald Trump’s tariff/tax increase and it may end up being an entire town.
Poplar Bluff, a small, Missouri town, was thriving a year ago because the biggest business in town was selling its product, nails, all over the world. Today the outlook isn’t as rosy. Singularly and specifically due to Donald Trump’s ill-advised tariff/tax on steel, that nail company, Mid-Continent Steel and Wire, has already lost over 60 jobs with more in the immediate future and if the tariffs continue, a complete shut-down by Labor Day 2018.
Mid-Continent was doing great. The largest manufacturer of nails in the country has been a solid, family owned company for 31 years. In 2012 it was sold to Deacero, a Mexican company, that was interested in the U.S. company because NAFTA (North American Free Trade Agreement) offered fewer restrictions on shipping steel into the U.S. After the purchase, Deacero changed nothing within the management, keeping the president and CEO, and little of the workforce. They did pick up the pace of production and doubled the nail output. Demand was there due to the economy and promise of infrastructure projects from the government. They also paid higher wages due to lower U.S. energy costs than in Mexico and offered full health insurance benefits. What could possibly go wrong?
Suddenly, sales dropped 50% in two weeks after the tariffs caused a 25% increase on steel, driving up nail prices. Today, sales are down 70% over one year ago. Foreign companies can now sell cheaper nails. The doors at Mid-Continent are closing.
Poplar Bluff is a town of about 17,000 residences. Mid-Continent employed 500 workers, nearly 3% of the entire town. If Poplar Bluff has average unemployment of 4%, by Labor Day that number will jump to 7%. Looking closer, the 2010 census lists 24% under 18, too young to work, and 12% over 65, too old. So that means the effective unemployment rate would be over 9%. Those are Recession era figures–crippling numbers, unnecessary during a thriving economy. But, unemployment from Mid-Continent is just the tip of the iceberg.
A typical small town, especially one with manufacturing as a core, has a wide variety of small, often family owned businesses to serve the community. There are usually cafes that serve lunch and taverns that cater to the after work “Happy-Hour” crowd that will immediately lose a big chunk of regular business because the nail-makers won’t be out going to lunch or stopping for an after-work beer. Those income losses will increase because the lunch-counter owner won’t be able to afford his after-work beer and the tavern owner won’t be out eating lunch or having coffee. The movie theatre and other entertainment venues will suffer the same fate when the town’s people can no longer add date-nights or family outings to their budgets.
Even more pain will occur when 1,500 to 2,000 people lose healthcare in the city (500 workers plus two or three others who depend on each of those workers). The local hospital will have to incur costs when uninsured people come for healthcare and treatment. This can close a small hospital. At minimum costs will be passed on to all citizens at a time when they can least afford to pay more. The schools will lose local tax revenue and have less to spend on the education of those 4,000 town-kids. Town rejuvenation will not occur as young people will not stay and none will move in to start a career making nails or serving Poplar Bluff’s citizens lunch or a beer.
It is more than likely that Poplar Bluff will become a Ghost Town.
Big cities are not immune to this scenario. Detroit, Michigan was historically the auto industry world epicenter. In 2008 a perfect storm of automation and technology crashed into a Great Recession and set the industry on its tail. The companies themselves have been revived, but the factories are functioning without anywhere near the cache of human workers required in the heyday 1950s and ‘60s. Unemployment remains high. The Detroit story is quite different from Poplar Bluff’s, but the impact on support businesses and services around the city is the same. The national economy is back, but Detroit still struggles.
Poplar Bluff is an innocent victim of presidential error. All this pain due to this Republican Administration deciding to challenge the 25-year-old NAFTA treaty and add a truly unnecessary tariff/tax on steel will replicate the domino effect of what happened in Detroit in Poplar Bluff.
The 4.1% yearly economic growth shown over the last quarter is reason to cheer, but it’s not the whole story. Poplar Bluff will not stand alone. State infrastructure projects are already being cancelled due to the increase in steel prices. Farmers will get a subsidy that may get them through harvest, but will not pay off the yearly loans that typically come due on January 1st. There will be countless other stories of companies, small businesses, and farms much like Mid-Continent Steel and Wire to more than offset any job creation in U.S. steel.
Farmers don’t want subsidies, they want to sell their crops. They certainly don’t want them rotting in the fields. And, Mid-Continent wants to sell nails around the world and help support the economy of Poplar Bluff, Missouri. The mostly Republican area still supports the man they helped vote into office, but voter after voter, time and again have looked into a journalist’s camera and said, “Mr. Trump, you need to fix this–now!”
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