In One Corner Of U.S., Trade Wars Aren't That "Easy To Win"

York County, Pennsylvania, nestled along the Mason-Dixon line at the Maryland border about 50 miles west of Philadelphia, has a central place in U.S. history. The Continental Congress met there to draft the new nation's founding documents in 1777 and 1778. 

Now, the county is a snapshot of contemporary America, with its borders encompassing farms, factories, suburban malls and city life. One in five adults in York County work in manufacturing, about twice the state average. The county's top agriculture products include soybeans and hogs, while downtown York City is home to a rising number of entrepreneurs. 

And like the rest of the country, all of them have had to adjust to the U.S. trade war with China, a conflict President Donald Trump once declared "easy to win." Other big changes in trade, including the wait for the new U.S.-Mexico-Canada Agreement (USMCA) trade agreement and lingering impacts from Chinese and European counter-tariffs, have multiplied the challenges. 

U.S. China Trade War

Though China and the U.S. declared a temporary truce in the trade war in early October and are working on a "phase one" deal, it's still not clear whether a full armistice will happen any time soon. President Trump last week said if a deal isn't reached, the U.S. would likely raise tariffs even more.

York County "really is ground zero for this, the tariffs," Kevin Schreiber, CEO of the York County Economic Alliance, told CBS MoneyWatch. "There are real people behind these numbers. And you know, there are real families impacted."

Absorbing the costs of higher tariffs

If you have a sweet tooth, you'll know York County as the birthplace of the York Peppermint Pattie. If you're in manufacturing, you'll recognize it as the home of York brand heating and cooling systems.  

So far, York County's manufacturers seem to be shouldering the costs of paying higher tariffs on the supplies they need to make their goods, despite a nationwide manufacturing slump blamed at least in part on the trade war. The county's unemployment rate, though creeping higher, averaged 3.6% in the nine months through September — close to the historically low rate nationwide. And the housing market is still growing.

But there's anxiety among York's business owners, farmers, retailers and manufacturers.

JLS Automation, a specialty maker of food and agriculture packaging equipment with about 70 employees, has been able to absorb higher material costs, CEO Craig Souser told CBS MoneyWatch in October. Some expenses since the steel and aluminum tariffs on imports from Canada and Mexico have eased since the USMCA was penned last year. (So far, only Mexico has approved the USMCA deal.)  

In June, JLS hosted Vice President Mike Pence as part of a tour urging Congress to pass the new trade agreement. 

Up to 20% of JLS's specialized machines are exported, mostly to Canada. Souser wants the USMCA passed so companies have certainty when it comes to the rules, he said. Emotions can run high on both sides of the border, with Souser worrying that a Canadian customer angry at U.S. policies could turn to Canadian or European competitors to buy machines.

"We will be competitive. We will make our equipment desirable," he said. "We just don't want some kind of attack that makes our equipment unrealistically unaffordable" or "emotionally unwanted."

Pleading for a break from Washington

Manufacturers like JLS rely on the skilled labor force that clusters in York, said Souser, who grew up in the area. Big companies like Harley Davidson, aerospace giant BAE Systems and multinational conglomerate Johnson Controls, which bought York heating and cooling in 2005, mean a pool of highly skilled workers are nearby. Harley this year expanded the local plant by 400 people after shutting U.S. plants elsewhere, a relief to locals.

The workforce is one reason Klinge Corp., the only U.S. company that custom-fits large shipping containers with specialized designs and temperature controls, stays put in York County even as its bigger competitors have all moved overseas.

Klinge's containers carry everything from pharmaceuticals to oil and gas to dairy products. But the basic shell containers needed to retrofit the vessels are made exclusively in China and must be imported, CEO Allan Klinge said in testimony before the Office of the United States Trade Representative in June.

Klinge, with around 70 employees, is already paying higher metal costs stemming from steel and aluminum tariffs imposed last year along with other increased costs, like copper parts. Klinge also pays tariffs China has slapped on U.S. goods that are shipped there. Up to 80% of the company's sales can depend on exports.

Allan Klinge's Washington plea worked. The 35-year-old family business won a rare exemption in September — the shell containers were left off the final China tariff list.

"It was an unsettling experience to go through, to not really know what the outcome was going to be, and we're quite happy they removed us," Klinge told CBS MoneyWatch.

Klinge recently redesigned its containers to be more efficient in a bid to lift profits. Instead, even with the tariff exemption, the company will use that buffer to absorb costs.

Another concern moving outside the U.S. would bring: safeguarding Klinge's intellectual property.

"We stay, because we continue to innovate," Allan Klinge said. "And it's easier for us to draw qualified engineers and everything else into the mix."

How tariffs suddenly "flip the script"

L2 Brands, a maker of custom insignia hats and clothing in Hanover, Pennsylvania, is busy diversifying where it buys blank hats that are imported and then custom-embroidered in York County. 

It takes more than 20 steps for the caps to be made by factories in Taiwan and China before being shipped home for finishing by skilled embroiders. The local workers operate sophisticated machines embroidering 15 hats a time, Brandon Wingert, the executive overseeing L2's supply chain, told CBS MoneyWatch.

Only a handful countries, mostly in Asia, have factories with the machinery and workforce capable of making the unfinished caps popular with L2 customers. After the merger, demand soared, and Wingert looked to buy its unfinished hats from outside Taiwan, home to the company's main supplier.

Just as L2 shifted about half its production to China in 2018, the Trump administration imposed tariffs on items that included caps. Wingert said he was able to negotiate lower prices both in China and with his Taiwanese supplier, and he plans to further diversify the business.

"Once the tariffs hit, I started to move in another direction," Wingert said. "Now, I'd say probably only 30% or 40% are coming out of China. So the tariffs have kind of flipped the script."

All things being equal, including cost, he's shifting more business back to his old supplier not just out of loyalty but also "a little bit of patriotism, I'll admit," Wingert said. "We follow beyond just what our own interests are, as far as the pushing back against China. You hear, you read the news, you know, and how they treat people politically."

Entrepreneurs hit, too

Some local retailers are feeling the squeeze from tariffs. Fashion designer Victoria Kageni-Woodard opened her clothing shop focused on African designs, Gusa by Victoria, in 2016 in downtown York City after spending more than a decade operating heavy machinery in the construction industry.

A Kenya native, Kageni-Woodard closed her small startup in February to rework her company into a larger business through a group called the Philadelphia Fashion Incubator, which helps steer entrepreneurs. Now she's grappling with a more complicated question of where to source her fabrics and how to expand profitably.

Because a huge portion of textiles are now made in China, it made sense to look there for basic fabrics, Kageni-Woodard said. But when she began investigating having sample boxes of clothing, she found that, including tariffs, what was once a $100 prototype box of clothing cost $170. The 70% increase just adds to the many factors she must consider when planning for a new business in the years ahead, even in a supportive community like York, she said.

"As disconcerting as it is, we still have to maintain spaces, entrepreneurs, because it is a constantly changing world, even without the tariffs," she said. "It just makes it that much more difficult.... People love my product. But are they going to be loyal enough to stick with me?" 

The round of tariffs on imported Chinese goods enacted on Sept. 1 included trade taxes on 85% of apparel and accessories imported into the U.S., according to an analysis from the Peterson Institute for International Economics.

Farmers want "a free and fair market"

China, as a response to Trump's tariffs, also halted imports of soybeans, among other agricultural goods. That's sent global prices down, hurting even farmers who don't export, said Mark O'Neill, communications director for the Pennsylvania Farm Bureau. 

Soybeans, the top crop in York County, were selling at about $10.50 a bushel before the first tariffs were announced last year and China then stopped buying the U.S. crop as retaliation. The price dropped more than 20% to $8.

Billions in subsidies from the Trump administration are helping U.S. farmers pay their bills, but local farmers want to sell into a thriving market they can create over years, O'Neill noted. 

York County farmers received about $4 million of $12 billion in federal subsidies distributed nationwide last year. Most were used for soy and corn crops, according to U.S. data provided by the Environmental Working Group.

If a proposed "phase one" agreement between China and the U.S. is reached in coming weeks, it may include a China promise to buy $40 billion to $50 billion in agricultural goods from American farmers. Still, farm debt is expected to reach a record $416 billion this year, up 40% from 2012.

Most farmers "would prefer not to receive any [federal] payments. They would rather earn their money in a fair and free market," O'Neill said. The subsidies help pay bills, but didn't "make them whole."

"So in one way, they were thankful to get what they got because of some bills," O'Neill said. "But ultimately they'd rather operate in a free and fair market where they're earning their own money and making more money doing so."

(RACHEL LAYNE) - CBS News

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