Tariff trouble has been a long time coming for a number of Vermont companies.

President Donald Trump imposed a 25 percent tariff on steel and a 10 percent tariff on aluminum imports in May from both Canada and Mexico. Yet many Vermont businesses had already been feeling the pain for months, the owner of Queen City Steel Co. in Burlington says.

The firm's suppliers started raising their prices in November 2017, owner Jeff Goldfield said. That's when rumors of tariffs began circulating, six months before any tariffs went into effect.

“It wasn’t just a little bit,” Goldfield said of the price increases. “Every month, they were hitting it. Once in November, once in December, once in January.”

The result for Queen City Steel, which supplies raw steel to fabricators and builders, is this: A truckload of steel that cost up to $10,000 before the tariffs now costs upwards of $30,000.

The company is hardly alone in Vermont. Gov. Phil Scott, a Republican, said tariffs serve only to slow the economy down.

“I feel as though we have a heated-up economy and we don’t want to do anything to squelch that,” Scott said at the 2018 New England Governors and Eastern Canadian Premiers conference in Stowe last month. “Fear, at least apprehension, leads to sitting on your hands. I’m concerned, and I think a lot of businesses throughout Vermont are apprehensive.”

More:Trump's tariffs: A closer look at what they are and how they will work

Colchester casting machine company frets tariffs

One business feeling apprehensive about the tariffs is Hazelett Corp. in Colchester, a manufacturer with 160 employees that exports globally to about 24 countries, including China. It is among Vermont's largest manufacturers.

Hazelett makes continuous casting machines that are used to manufacture rolls of aluminum and copper from molten metal, as well as copper bar and strips of zinc and lead. The machines weigh up to 150 tons and can cost more than $20 million each.

About one-third of the copper wire produced in the world goes through Hazelett Corp. bar casters, said David Hazelett, whose grandfather founded the company in Cleveland a century ago. The firm has nearly 70 customers around the world, according to Marketing Director Keith Decker, including one of the world’s largest manufacturer of car batteries, with operations in China. Decker declined to identify the company, citing a confidentiality

So the stakes are high for one of Vermont’s largest manufacturers, especially where the Chinese market is concerned. After Trump imposed tariffs, the Chinese government has retaliated with their own tariffs that his company must pay.

“Virtually all of our spare parts we sell to China, which represents about 20 percent of our ongoing business, are subject to a 10 to 25 percent tariff," Hazelett said. "And we struggle anyway to maintain our customers in China."

Hazelett Corp. is affected by the Trump Administration’s tariffs in a variety of ways. The primary source for the steel used to make the casting belts on the Hazelett Corp. continuous casting machine is in France.

“We’re now paying a 25 percent duty on all that material,” Hazelett said.

Tariff on Canadian aluminum takes toll

The aluminum tariff has hit Hazelett even harder because aluminum is such an important part of its business.

“The tariffs have brought a lot of shocks, but the biggest one and worst one is this 10 percent tariff against Canadian aluminum,” David Hazelett said. “It’s a tax on American costs that nobody else bears, only the United States.”

The United States consumes about 12 million tons of aluminum annually and produces less than four tons, Hazelett said.

“So we rely on a couple of things,” he said. “One is a lot of scrap aluminum. We have the biggest scrap aluminum market in the world.”

More:How these scrap yards found themselves on front lines of the US-China trade war

The United States does not produce enough scrap on its own to meet the country’s demand for aluminum, and produces very little “primary” aluminum, as newly manufactured aluminum is known.

Making aluminum requires enormous amounts of electricity. Power prices in the United States are relatively high, one of the reasons the U.S. aluminum smelting industry was “largely curtailed,” according to Hazelett. Canada, on the other hand, has plenty of cheap hydroelectric power.

The tariffs are supposed to protect the U.S. aluminum industry and increase investment in our production facilities. But David Hazelett is unconvinced either of those things will happen, given the Canadian advantage in electrical costs.

“Canada was and still is our main supplier of primary aluminum,” Hazelett said. “They send it to the United States, we roll it into sheet, we send it back as sheet or finished products. Everybody’s happy.”

Symbiotic relationship with Mexico on scrap aluminum disrupted

That symbiotic relationship has been severely disrupted by the tariff, according to Hazelett. As for scrap, Mexico produces very little primary aluminum, but it has a big scrap market. Mexico would ship all of its scrap to the United States, convert it into sheet product or finished product and take it back.

Again, that cycle has been disrupted by the tariff. And there is more, longer term damage coming, according to Hazelett.

“Two weeks ago we were invited to meet with this Mexican company that has tremendous support from the Mexican government to build a plant ASAP to produce aluminum sheet with all the scrap they have,” Hazelett said.

Hazelett worries that the damage being done, in his view, by the tariffs will not be easily reversed.

“First of all, we’ve created an incentive for all these other countries to develop trading relationships and exclude the United States,” he said. “I travel a lot and it’s been tough, I’ll tell you, trying to explain why we do the things we do. I kind of stopped trying to explain.”

As for the steel industry, optimism is tough to come by these days, Queen City Steel's Goldfield said.

“Steel warehouses in Montpelier and Rutland, any of the fabricators that use steel, if they bid a job six or eight months ago working on a 10 to 15 percent margin, and the price of raw material has gone up 25 to 30 percent," he said.

"Those numbers don't add up."

Contact Dan D’Ambrosio at 660-1841 or ddambrosio@freepressmedia.com. Follow him on Twitter @DanDambrosioVT.

Editor's note: This story has been updated to clarify points regarding Hazelett Corp's operations..

