Trump’s Tariffs Are Producing Billions, But China Isn’t Paying

President Donald Trump is right to say that his tariffs are generating billions of dollars for the U.S. But China and other countries aren’t paying them as he’s suggested. Trump’s Tariffs Are Producing Billions, But China Isn’t Paying

Trump’s comments have suggested the U.S. is benefiting without paying, such as a Jan. 3 tweet that “the United States Treasury has taken in MANY billions of dollars from the Tariffs we are charging China and other countries that have not treated us fairly.”

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A day later he told reporters that “we’ve taken in billions and billions of dollars in tariffs from China and from others.’’

“Let me be very clear: Tariffs are taxes paid by American families and American businesses — not by foreigners,’’ Thomas Donohue, president of the U.S. Chamber of Commerce, said in his annual state of American business address last week.

Companies aren’t equivocating about the cost. Ford Motor Co. executives, speaking during the Deutsche Bank Global Automotive Conference in Detroit on Wednesday, said they see a $700 million headwind from duties this year. General Motors Co. said late last year that tariffs on steel and aluminum had already cost it $1 billion.

According to data from U.S. Customs and Border Protection, more than $13 billion in duties imposed by the Trump administration were assessed on imported goods as of Dec. 18. Actual collections could lag and be lower because of refunds and other factors, but Treasury Department reports show receipts from all customs duties have risen sharply since the tariffs took effect.

While Trump has suggested on Twitter and in public comments that tariffs are somehow being charged to or paid by China and other countries, trade economists say that’s generally misleading.

U.S. importers of record are responsible for the duties, and ultimately U.S. businesses and consumers could pay through higher costs, they say.

Trump is “suggesting this is bringing in lots of new revenue and all of the burden is falling on the Chinese,’’ said Phil Levy, senior fellow on the global economy at the Chicago Council on Global Affairs and a former senior economist for trade for President George W. Bush’s Council of Economic Advisers. “I think that’s mostly false.’’

Trump Tax

Johns Hopkins University applied economics professor Steve Hanke, a member of the Council of Economic Advisers under President Ronald Reagan, put it more bluntly.

“Tariffs on Chinese imports are paid by Americans, not by the Chinese or their government. The President’s tariffs are simply a #tax on American consumers,’’ Hanke said on Twitter Jan. 6.

Hanke also pointed out that there are offsets to increased revenue from Trump’s tariffs, including as much as $12 billion in aid being paid to farmers after China slapped retaliatory tariffs on U.S. agricultural products.

The White House didn’t respond to messages seeking comment. Trump has said any economic pain from tariffs or retaliatory duties imposed by other countries will be outweighed by the long-term benefits from new trade deals.

The Trump administration imposed tariffs starting last January on foreign-made solar equipment and washing machines, then levied duties on steel and aluminum imports from March on the grounds of national security.

He has slapped duties on about $250 billion in Chinese goods in response to a trade deficit and allegations of intellectual property theft and other unfair trade practices.

Customs and Border Protection collects the tariffs based on the price paid for shipments and the tariff rate in effect, and duties are charged when shipments are released into the U.S.

The assessed amount now tops $13 billion, with $8 billion coming from the duties on Chinese goods, data provided by CBP show.

The duties are deposited in the U.S. Treasury. Customs duties increased by $8 billion in the final three months of 2018, an 83 percent gain from the year-ago period thanks in large part to tariffs imposed by Trump, according to estimates from the non-partisan Congressional Budget Office.

It’s not foreign governments paying, said Dan Anthony, vice president of The Trade Partnership, an economic consulting firm. U.S. businesses paid $2.8 billion in new Trump tariffs in October alone, The Trade Partnership determined in an analysis for Tariffs Hurt the Heartland, a coalition of business and agricultural groups lobbying against Trump’s duties.

Trump’s Trade War May Be Driving Chinese Investors To Bitcoin

As the Chinese yuan falls in value due to factors like the ongoing trade war with the U.S., there are signs that locals are increasingly moving funds into bitcoin.

According to a Bloomberg analysis of prices over 30 days, the negative correlation between the yuan and bitcoin has fallen to a record low in the last seven days.

While previously the Chinese government has sought to keep the value of its national currency above 7 CNY to the dollar, last month the yuan was allowed to slide below that level, dropping to its lowest for 10 years.

The move was reportedly in response to U.S. President Donald Trumps threats in early August to impose a 10 percent tariff on Chinese imports.

That the drop in yuan value is causing a flight by Chinese investors is backed up by exchange data. Bloomberg spoke to Dr. Garrick Hileman, research director at Blockchain and CoinDesk contributor, who said that bitcoin prices on exchanges such as Huobi that cater more to Chinese traders are trading at a premium.

The inverse correlation between bitcoin and the yuan also notched up in April and May “as the tensions ratcheted up with the deterioration on U.S.-China trade relations,” Hileman said.

The report comes as new details emerge on China’s own national digital currency. The recently appointed chief of the digital currency division of the People’s Bank of China has said the upcoming digital yuan will have features not offered by Facebook Libra.

Updated: 11-6-2019

U.S. Collects a Record $7 Billion in Tariffs in September

Tariff revenue jumped 9% from August and was up more than 59% from a year earlier.

The U.S. collected a record $7 billion in import tariffs in September, fresh figures show, as new duties kicked in on apparel, tools, electronics and other consumer goods from China.

Tariff revenue jumped 9% from August and was up more than 59% from a year earlier. The revenue is a bounty for the U.S. Treasury, but is an increasing burden on the American businesses that import Chinese products—and their customers.

The new figures are based on an analysis of official Commerce Department data compiled by Trade Partnership, an economic consulting firm. The data was released by Tariffs Hurt the Heartland, a coalition of business and agricultural groups who oppose the tariffs.

Last month’s sharp rise was driven by a new 15% levy on consumer goods that went into effect Sept. 1. Imports of these items were valued at $111 billion last year, according to an analysis by The Wall Street Journal.

The U.S. has always collected tariffs on some items, but those duties have soared under a series of new levies that President Trump ordered on Chinese imports beginning last year. Mr. Trump said the duties were needed to get China to curtail trade practices that penalize U.S. businesses.

The tariffs are assessed directly to importers in the U.S., although Mr. Trump has at times claimed China pays them. But when he postponed a batch of tariffs until Dec. 15, he said he didn’t want to cast a pall over the holiday shopping season.

Still, the rising cost of the tariffs has increased pressure from business groups to resolve the trade dispute.

“It’s a massive expansion of taxation on American employers and consumers,” said Peter Bragdon, chief administrative officer of the Columbia Sportswear Co., whose firm had many apparel items hit in the latest tranche of tariffs.

The company has notified customers that they would have to raise prices on many of those items, he said.

The Trump administration is considering removing some of the tariffs against China as part of the negotiations over “phase one” of a U.S.-China trade deal.

The first major tariffs were placed on global imports of steel and aluminum in March 2018, but tariffs from China began in July 2018 and have been increased on several different lists of goods. The increased tariff rates on those lists have become the vast bulk of duties collected.

More than $5 billion was collected on imports from China last month, with tariffs assessed to the rest of the world garnering about $2 billion.

The new tariffs imposed on the European Union in October, imposed after a long-running dispute at the World Trade Organization over aircraft subsidies, aren’t yet included in the data.

In the 12 months through September, the U.S. brought in more than $70 billion in tariffs, according to data from the Treasury Department. That figure is about double the amount of tariff revenue from before the trade war.

While tariff collections have increased, so have trade-war related expenses. To help mitigate the losses to U.S. agricultural exporters, who have suffered from international tariff retaliation, the Agriculture Department has authorized $28 billion in payouts to farmers.

The figures only account for the direct burden of the tariffs, said Dan Anthony, vice president of the Trade Partnership.

“This is very much the low-end estimate of costs, because there’s also costs associated with shifting suppliers, shifting to higher-cost sources, that aren’t going to show up in the data,” said Mr. Anthony.

Updated: 11-25-2019

U.S. Tariffs On China Have Oddly Little Effect On Import Prices. What’s Going On?

Chinese exporters not cutting prices despite losing market share.

Trainees work in a garment factory in China. High U.S. tariffs have had a puzzling lack of impact on the price of Chinese imports.

Steep U.S. tariffs on most Chinese goods have had a puzzling lack of influence on import prices, raising questions about who exactly is paying the lion’s share of higher duties.

It’s not the Chinese, at least not directly. American businesses and consumers are bearing the biggest direct cost of billions in dollars in U.S. tariffs, a wave of research has found.

What’s far less clear is how the burden is split, according to the New York Federal Reserve.

The Trump administration launched its first broadside against China in July 2018 with a round of tariffs. Duties up to 25% have since been levied on some $370 billion in imports, encompassing most Chinese goods sent to the U.S. market each year.

Tariffs are collected when Chinese products enter ports in cities such as Los Angeles, Miami and Savannah, Ga. They are paid by the U.S.-based companies that receive the goods.

One thing is quite clear, the Fed study said. Chinese companies themselves haven’t swallowed most of the cost tied to U.S. tariffs, as President Donald Trump has frequently contended.

Chinese firms could have cut prices to ease the financial burden on their American partners, the Fed said, but the reduction would have had to equal about 20% to fully offset the effects of a 25% tariff.

Instead Chinese prices have fallen just 2% or so since the tariffs first went into action.

“This drop is a small fraction of the amount required to offset the increase in tariff rates,” the New York Fed said.

Even that doesn’t appear to be noteworthy. The cost of imports from countries not affected by the tariffs, such as Mexico and South Korea, have fallen by about the same amount.

The Chinese currency, meanwhile, has declined 10% in value vs. the dollar since tariffs were enacted. So Chinese suppliers could in theory cut prices they charge U.S. importers by the same amount to relieve the harm.

Instead, Chinese companies seem to have padded their own profits to offset the decline in demand tied to U.S. tariffs, the Fed said.

Chinese Response

Why haven’t Chinese firms cut prices more deeply to protect against the loss of U.S. market share?

Their profit margins may already be razor thin. They might not have many competitors. Or they may worry that cutting prices for U.S. customers will spur non-U.S. customers to demand the same, the Fed said.

Whatever the case, there’s no doubt that demand for Chinese goods has abated. In fact, the U.S. has raised just two-thirds of the revenue through tariffs that should have been expected largely because of a decline in Chinese imports.

The Fed said imports of Chinese products affected by U.S. tariffs have fallen by an annualized $75 billion. That’s a huge chunk of business that’s gone to Europe, Japan and other Asian countries.

These are the kinds of losses that have pushed China to resume negotiations with the U.S. The two countries are struggling to announce the first step of a broader agreement.

China’s share of the U.S. market for machinery and electrical equipment, for example, has fallen about 2 percentage points since 2017. And it’s portion of the U.S. electronic market has tumbled 6%.

“Regardless of whether consumers or businesses bear the burden, sustained high tariffs on Chinese goods will encourage a search for alternative suppliers,” the New York Fed said in a report written by researchers Matthew Higgins, Thomas Klitgaard and Michael Nattinger.

One caveat: Some companies may be shifting the final stages of production for goods largely made in China to third countries to avoid the tariffs. How much is impossible to say.

Bigger Burden On Business

It’s even harder to figure out how the cost of tariffs is split, the Fed said, between U.S. wholesalers at the port of entry, retailers who sell the products and consumers who eventually buy them.

The Fed pointed out there’s not much data or research to make accurate estimates because heavy tariffs largely fell into disuse among the wealthiest nations after World War Two.

The most likely scenario is that U.S. companies have largely absorbed the cost of tariffs by accepting lower profits given the strong resistance by customers to higher prices. Companies have been unable to raise prices very much for years.

There’s one other intriguing possibility, the Fed suggested: Companies may be leaving reported import prices unchanged to reduce their U.S. profits and lower their tax burden.

Updated: 10-25-2020

China Trade War Didn’t Boost U.S. Manufacturing Might

Factory production peaked in 2018, data show; Trump advisers say tariff campaign will yield benefits over time.

President Trump’s trade war against China didn’t achieve the central objective of reversing a U.S. decline in manufacturing, economic data show, despite tariffs on hundreds of billions of dollars of Chinese goods to discourage imports.

The tariffs did succeed in reducing the trade deficit with China in 2019, but the overall U.S. trade imbalance was bigger than ever that year and has continued climbing, soaring to a record $84 billion in August as U.S. importers shifted to cheaper sources of goods from Vietnam, Mexico and other countries. The trade deficit with China also has risen amid the pandemic, and is back to where it was at the start of the Trump administration.

Another goal—reshoring of U.S. factory production—hasn’t happened either. Job growth in manufacturing started to slow in July 2018, and manufacturing production peaked in December 2018.

Mr. Trump’s trade advisers nonetheless say the tariffs succeeded in forcing China to agree to a phase one trade deal in January, in which Beijing agreed to buy more U.S. goods, enforce intellectual property protections, remove regulatory barriers to agricultural trade and financial services and to not manipulate its currency.

They also say the tariffs—which remain on about $370 billion in Chinese goods annually—will over time force China to end unfair practices and help rebuild the U.S. manufacturing base.

Tariffs “are having the effect of bringing manufacturing jobs back to the U.S.,” U.S. Trade Representative Robert Lighthizer said in an interview, citing statistics that show a net gain of 400,000 U.S. manufacturing jobs from November 2016 until March 2020, when the pandemic forced widespread factory closures.

However, about 75% of the increase in manufacturing jobs occurred before the first tranche of tariffs took effect against China in July 2018, when annual growth in manufacturing jobs peaked and then began to decline.

By early 2020, even before the pandemic reached the U.S., manufacturing job growth had stalled out, and factories shed workers in four of the six months through March.

An industry-by-industry analysis by the Federal Reserve showed that tariffs did help boost employment by 0.3%, in industries exposed to trade with China, by giving protection to some domestic industries to cheaper Chinese imports.

But these gains were more than offset by higher costs of importing Chinese parts, which cut manufacturing employment by 1.1%. Retaliatory tariffs imposed by China against U.S. exports, the analysis found, reduced U.S. factory jobs by 0.7%.

Mr. Trump is one of a long line of U.S. presidents to use tariffs to protect favored industries. President Obama put steep tariffs on Chinese tires, President George W. Bush imposed tariffs on steel and President Reagan hit Japanese televisions and computers.

But Mr. Trump’s enormous increase in tariffs on Chinese goods represented a sharp departure in post-World War II economic history. Since the war, the U.S. has led round after round of global trade talks aimed at reducing tariffs. No longer.

“This is the biggest use of tariffs since the Smoot-Hawley tariffs” during the Great Depression, said Chad Bown, a trade expert at the Peterson Institute for International Economics. “The economic impact is going to take years to play out.”

Mr. Trump has called himself a “tariff man” and said businesses that complain about the impact of tariffs should simply build factories in the U.S.

“I happen to be a tariff person because I’m a smart person, OK?” Mr. Trump said in an interview with The Wall Street Journal in November 2018 as the trade war intensified. “We have been ripped off so badly by people coming in and stealing our wealth.”

The tariff strategy, however, played out differently for manufacturers depending on their individual circumstances. That is shown by the experience of two Midwestern manufacturers, Atlas Tool Works Inc. and Hemlock Semiconductor Operations.

Illinois-based Atlas said sales of its brackets, gears and conveyor belts used in manufacturing rose 18% in the year after Mr. Trump placed tariffs on similar parts from China. But Hemlock, a Michigan company that makes polysilicon used in computer chips and solar cells, is still struggling.

The phase one trade deal signed by Washington and Beijing in January specified that China would buy more U.S. solar-grade polysilicon, Hemlock’s main product. But China never lifted its tariffs on polysilicon—just as the U.S. kept tariffs on most Chinese imports—and Hemlock didn’t register any gains.

“We’ve reached out to Chinese companies, ‘Are you interested in buying polysilicon?’” said Phil Dembowski, Hemlock’s chief commercial officer. “But they all tell us the same thing—no mechanism to import it without paying duties. They’d like to, but they can’t afford that tariff.”

Atlas, by comparison, was able to benefit from the tariffs because it shuns Chinese suppliers—a point of pride for the family-owned business founded in 1918.

The company says it was forced to close a lucrative business supplying telecom-gear makers in the early 2000s because of Chinese competition.

Atlas refocused on fabrication equipment for the defense and health-care industries, but that eventually came under assault from cut-rate Chinese competition too, according to owner Zach Mottl.

When Mr. Trump approved tariffs in 2018, sales boomed. Atlas had no Chinese suppliers, so its costs remained stable. The company, which had about 100 employees before tariffs, added about two dozen new positions.

“We saw the uptick right away when the tariffs hit,” Mr. Motti said.

But for companies including Hemlock, the tariffs backfired. Rather than pressuring Beijing to open markets, China responded with retaliatory tariffs that made Hemlock’s products more expensive there. And U.S. companies that buy parts from China suddenly faced higher costs.

U.S. trade negotiators recognized that many U.S. companies, like Hemlock, were dependent on Chinese supply chains, and sought to get China to agree to pare back its industrial subsidies. But the U.S.-China trade deal signed Jan. 15 failed to achieve that goal, which was put off for future talks that have yet to materialize.

Mr. Trump and his opponent, former Vice President Joe Biden, have tangled over whether the president’s trade and tariff policies have brought back factory jobs. “They gave up on manufacturing,” the president said of Messrs. Biden and Obama in the first presidential debate.

Mr. Biden was equally dismissive of the Trump record during the session, saying that “manufacturing went into the hole” even before the pandemic.

Even so, Mr. Biden’s top advisers don’t commit to rolling back the Trump tariffs on China. Rather, they say the vice president would consult with allies on what to do about the levies. “Tariffs would be among the tools we would consider in an allied approach,” said senior Biden adviser Jake Sullivan.

Derek Scissors, a resident scholar at the conservative American Enterprise Institute, initially supported the Trump administration’s approach to China, but now says the effort largely failed to achieve its objectives.

“There are reasons to apply tariffs, there are reasons the bilateral deficit can matter, but it’s not the big payoff of manufacturing jobs,” Mr. Scissors said.

Mark Bassett, the CEO of Hemlock, was enthused to see the Trump administration’s efforts to level the playing field in the solar industry. But he came to believe more fundamental changes were needed for his company and others that compete against Chinese rivals who are subsidized by Beijing.

“You need to take a look at things a little more holistically, rather than a whack-a-mole methodology,” Mr. Bassett said, comparing tariffs to the arcade game in which targets keep popping up.

Chinese companies that make solar panels bought $1 billion of American polysilicon, like Hemlock’s, in 2010. Anticipating continued strong sales to China, Hemlock spent more than $1 billion to build a new factory in Clarksville, Tenn., that was completed in 2012.

But China had plans of its own. Solar was specifically identified as a strategic industry for Chinese dominance in “Made in China 2025,” the country’s national plan to dominate high-tech manufacturing.

That plan included making solar-grade polysilicon—turning China into a competitor to Hemlock instead of a customer.

Solar-grade polysilicon exports to China had shriveled to $107 million by 2018. The plant in Clarksville never operated, and was closed in 2014.

“It’s the classic Chinese industrial story,” said Mr. Bassett. “Continued subsidization, no requirements to deliver a return on investment, no enforcement of environmental or safety standards. An artificially low price that drives everyone else out of business.”

Updated: 10-27-2024

What Really Happens On The Ground When The US Slaps Tariffs On China

Pittsview, Alabama, and Emporia, Virginia, both make trailers essential for commerce. They show the surprising consequences of trying to protect American jobs.

Pittsview, Alabama, home to 1,000 people, has a corner store, a clutch of churches and an abandoned train depot. Emporia, Virginia, population 5,500, has a casino, strip malls and truck stops. They’re the sort of forgotten communities that make up much of rural America.

But if you want to understand the depth of the economic rivalry between the 21st century’s two superpowers, the US and China, they’re good places to start.

The two towns sit on opposite sides of a yearslong tariff battle over a mundane product the global economy needs to keep moving: shipping container trailers. The 1950s invention of the 40-foot steel container revolutionized international shipping and helped supercharge globalization.

Once those boxes hit land, they have to be attached to a trailer chassis— essentially a long, skeletal bed frame with wheels—so trucks can haul them, and the products inside, across the country.

During the pandemic supply chain mess, a shortage of trailers left stacks of containers stranded at ports, contributing to the inflation surge and cost-of-living crisis that became a political liability for President Joe Biden and still hangs over the US economy and this year’s election.

Pittsview and Emporia both have chassis plants that have made them central to a fight over tariffs on Chinese-manufactured trailers that’s ended up raising questions about who gets to fly the “Made in America” flag and avoid import taxes.

The conflict isn’t political in the blue-state-versus-red-state sense—in a rare case of bipartisanship, Democrats and Republicans generally back tariffs to reduce reliance on China in critical areas like logistics.

Republican Donald Trump’s election in 2016 and the support he drew from hollowed-out factory towns helped upend what had been a decades-old Washington consensus supporting free trade.

Having slapped tariffs on everything from steel to Scotch whisky, Trump is repeating the script as he runs for reelection, proposing a 10% to 20% tariff on all imports that would be imposed above yet more duties on imports from China.

His Democratic opponent, Vice President Kamala Harris, has dubbed it the equivalent of a national sales tax that would raise costs for the middle class.

But the Biden administration kept Trump’s China tariffs and sought to limit the country’s access to advanced chip technologies, policies Harris appears set to maintain if she wins in November.

As most economists will tell you, tariffs are a messy business that usually result in the consumer paying the price. The story of Pittsview and Emporia shows just how surprising the consequences can be for the industries supposedly being protected.

The Pitts name looms large over Pittsview. Pitts Enterprises Inc.’s headquarters sits in a restored 19th century home with rocking chairs on its porch that once belonged to William Pitts, one of the town fathers.

The community is occasionally mistaken for a ghost town because of a pair of single-story brick buildings—one a former bank and the other carrying the legend Pitts & Sons—that appear abandoned along the main drag. Just up the road, there’s the busier Pittsview Corner Market, where patrons can gas up and eat Krispy Krunchy chicken.

Like many properties in Pittsview, the vacant buildings are owned by members of the family that gave its name to the town, as is Pitts Enterprises, one of the largest employers in rural Russell County.

Andrew Pitts founded the company in 1976 to build trailers for the local forestry industry and ran it until 2002 when his son, Jeff Pitts, the current owner and chief executive officer, took control.

Pitts makes trailers of its own design in its sprawling factory yard a mile from its headquarters. Axles, tires and other parts pile up around metal factory buildings, whose huge doors, when rolled open to move material in and out, expose the workers inside to the elements.

Inside, along with robots and other machines, sit stacks of steel plates.

They’re welded into I-beams to form the rigid backbone of trailers and bent, cut and shaped into other “subassemblies” such as the running gear that holds the axle, or the neck that connects the trailer to the truck.

“It is a rough, dirty job,” says Dustin Preslar, who started at Pitts over a decade ago as a welder and worked his way up to plant manager. “It’s hot in the summer, cold in the winter.”

The company got into the chassis market in 2017 and started selling 40-foot trailers under its Dorsey Intermodal brand. But according to JP Pierson, Pitts’ president, the expansion soon stumbled because of intense Chinese competition.

By 2018, as cheap Chinese trailers flooded the market, Pierson says Pitts was shut out. “It really didn’t matter how low I went on the price,” he says. “I was not competitive.”

So in July 2020, Pitts and four other US trailer manufacturers filed a petition in Washington seeking punitive tariffs on chassis made by state-owned Chinese container giant China International Marine Containers Group Co., or CIMC.

At its height, in the years leading to the pandemic, CIMC, a heavyweight in the global market for shipping containers, sold more than 45,000 new trailer chassis annually in a US market of 70,000 to 80,000.

And because of well-documented subsidies on electricity, steel and other essentials used to make the chassis, the Chinese company sold them at a price that local manufacturers said they couldn’t match.

Within less than a year, the US companies had won their case. By May 2021 the government was finalizing tariffs of more than 220% on Chinese trailers, in addition to the 25% duties established during the Trump administration.

A chassis from China that might have sold for $10,000 suddenly cost almost $35,000. Imports halted, leaving a hole in the market just as the economy suddenly needed a lot more trailers.

Domestic manufacturers cheered and pledged to ramp up production and hire hundreds of new workers. Trucking companies and port operators, meanwhile, complained that the new duties and the end of chassis imports were making their now acute supply chain problems even worse.

Millions of American consumers were suffering to save a few thousand jobs, pundits complained.

That October, US chassis manufacturers pushed back and implored Biden to keep the tariffs in place. Making trailers in the US should be a national priority, they argued, because CIMC’s dominance threatened economic security.

“The problems at America’s ports are systemic and in part are as a result of allowing China to dominate the supply of equipment that supports America’s supply chain,” they wrote in a letter to the president, who was already seeing his approval rating slide as inflation climbed. The Biden administration kept the tariffs in place.

Business was looking up for Pitts. But what came next illustrates how tariff fights rarely have tidy endings.

China-owned CIMC first set up shop in Emporia in January 2015 to serve East Coast ports and logistics hubs. At its height the company brought almost 100 jobs paying $18- to $20-per-hour to a place that still offers limited opportunities beyond working at the local Walmart or the Boar’s Head plant making processed meat.

(The factory shut down indefinitely after a fatal food poisoning outbreak over the summer.) CIMC’s two single-story buildings stand between an underused four-lane highway and train tracks a few minutes from Interstate 95.

The port of Norfolk, a customer, is a 90-minute drive. A company next door makes bulletproof glass for the military.

As it became clear the new duties were coming, CIMC renamed its American subsidiary CIE Manufacturing. The rebrand included a red, white and blue logo featuring an eagle and a website touting models with patriotic American names like the Pioneer and the Revere.

It invested more than $20 million in creating a non-China supply chain to comply with the rules.

The company used a plant in Thailand to make frames with steel from Europe and South Korea. Once shipped to CIE’s expanded plants in California and Emporia, the frames were combined with axles manufactured in Frankfort, Kentucky, landing gear (or retractable legs) used to hold up resting trailers made in Muskegon, Michigan, and suspension kits produced in Springfield, Missouri.

Trevor Ash, the plain-spoken Canadian who serves as CIE’s chief executive officer, likens what CIMC did to Japanese carmakers’ response to US import barriers in the 1990s.

Companies such as Honda Motor Co. and Toyota Motor Corp. built factories in the US and created thousands of American jobs. By 2023, CIE employed some 400 people at its two US plants. “We’ve done what’s been asked of us,” Ash says. “We’re creating lots of jobs here.”

As it was retooling its business, CIE executives discovered something about one of the rivals that pushed for the tariffs: Alabama-based Pitts Enterprises was importing thousands of chassis from Truong Hai Group Corp., a privately held Vietnamese company that makes cars, buses and trucks for the likes of Kia, Mazda and Peugeot.

With CIMC’s trailers knocked out of the market, Pitts had orders from customers to import almost 18,000 chassis made by its Vietnamese partner over a roughly 16-month period.

CIE suspected that the chassis included parts and raw materials, mainly steel, from China. Which meant they ought to be subject to the very same tariffs Pitts had lobbied to have put on CIMC’s old Chinese-made chassis.

So in 2022, CIMC, which remains CIE’s corporate parent, lodged a complaint with US Customs and Border Protection, leading to an investigation. By March 2023, Customs ruled that Pitts’ Vietnamese trailers contained enough Chinese components to be subject to the new tariffs—a decision that Pitts hotly contests.

It was a bombshell for Pitts, which faced a tariff bill worth tens of millions of dollars for the thousands of chassis already imported, not to mention millions more in lost revenue.

“It’s put a pretty good crunch on our company,” says Pierson, Pitts’ president, who insists the company did nothing wrong. The Customs ruling wiped out $250 million of expected gross revenue for a company that usually clears $50 million annually, he says.

It was forced to defer a plan to invest as much as $15 million to improve efficiency and add more state-of-the-art equipment for its workforce of 300.

Pitts, having just profited from protectionism, was suddenly paying a heavy price in its name.

The same coalition that had sought the original tariffs against Chinese chassis decided that the best defense was a good offense. Pitts and the four other US manufacturers filed a new complaint with Customs against CIE.

A month after Customs investigators released their Pitts finding, the agency announced it was launching another investigation.

CIE’s Thailand plant was a front to mask the shipment of Chinese-made trailers to the US, the rival companies argued. And just like that, CIE was facing another damaging probe and millions of dollars in potential tariffs.

By August 2023 it had suspended imports of new frames to avoid having to pay tariffs into escrow while the investigation proceeded, and it started to pare back production in the US.

Jarvis Hicks landed at CIE in early 2022 after jobs greeting customers at Walmart and at a chain restaurant where he lasted only three weeks. By October 2023 his hours had been cut as the plant slowed to about half its capacity of as many as 30 chassis a day.

The company eliminated temporary positions, but, mindful of post-pandemic labor shortages, CIE avoided layoffs for the 62 remaining permanent staff by reducing hours, leaving employees like Hicks restless. “I don’t like it, to be honest, because I’m used to working all day,” he says.

Ash and other CIE executives insisted the company would be cleared. Customs investigators made a scheduled visit to the Thai plant in December 2023, but the investigation dragged on until April. CIE was deemed not guilty of tariff evasion and given the all-clear to get back to work. But the damage had been done.

The company had laid off most of its Virginia workers in January. In June the Emporia plant ran out of frames to turn into chassis.

When the last one was finished, Jose Perez, the plant’s operations manager, stood and watched with colleagues. “Everybody was sad,” Perez says. They wanted to know when work would pick up again.

By the end of July, Hicks was among the last two dozen people with reduced hours at the plant and was fatalistic about what might come next.

“If this is what’s going on with the business, I mean there’s nothing we can really do about it,” he says.

The plan was to ramp up production again in September, but amid a trucking recession and what’s now a glut of chassis built up in response to unprecedented pandemic demand, the market for trailers had cratered. For both the CIE employees in Emporia and the Pitts workers in Pittsview, everyone seemed to be losing.

As the name implies, what happens to Pitts matters to Pittsview and the region. Almost 80% of workers in Russell County commute to jobs outside the county, according to the Alabama Department of Labor, with many traveling to Columbus, Georgia.

A fifth of Russell County’s population lives below the poverty line. “Jeff Pitts and what he does up there are huge for Barbour and Russell counties,” says Phil Clayton, director of economic development at the Eufaula Barbour County Chamber of Commerce.

Pitts is still fighting the 2023 Customs decision and has sued the government in federal court, arguing that Customs misinterpreted the tariff. He is being penalized by a system that was supposed to protect US producers from a state-owned Chinese company, he says.

“They’ve turned it around and used it against us,” Pierson says. “That’s a fight bigger than a company in Pittsview, Alabama, can do by itself.”

The anti-dumping and subsidy duties levied on trailer chassis in 2021 were imposed as part of a mechanism allowed under international trade rules rather than presidential whim. The US has long been the most aggressive user of that system, with Chinese goods increasingly in the firing line.

But things changed when Congress in 2015 passed a law allowing any “interested party” to trigger investigations into tariff evasion. That led to tit-for-tat fights like the one between Pitts and its Chinese-owned rival.

What’s happening at Pitts in Alabama is also weighing on Greensville County, a 10-hour drive north along I-95. The county ranks among Virginia’s poorest and has struggled for years to attract manufacturing jobs.

The area has so far missed out on the boom in new construction for electric vehicle and battery plants, which have sprung from the Biden administration’s embrace of green energy and industrial policy.

Ash says Customs rules mean companies like his are effectively considered guilty and liable for duties until cleared. The investigation into CIE took more than a year, and the slowdown and eventual production halt cost the company more than $100 million in missed revenue.

Or as Ash puts it: “Two hundred-plus American families lost their jobs.”

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