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HOFFMAN

Geoff Hoffman, at Hoffman Manufacturing: “Our buildings are concrete and steel. So the cost of my building just went up significantly because of all the steel.”

Ray Statz has seen better years.

The owner of Qual Line Fence in Waunakee, a company Statz founded in 1956, said he and about 16 employees put in about 500 fences a year made with steel, aluminum and cedar, all products that have seen steep cost increases stemming from U.S. tariffs.

“Wood, steel and aluminum,” he said. "They're all hit."

He estimates that since the beginning of the year, he has seen the cost of the materials he uses climb between 25 and 30 percent. That's not enough to cause any layoffs, he said, but the trade dispute adds uncertainty to the market.

“It makes me lose some sleep at night,” Statz said. “It makes it difficult. We’re supposed to take a gamble and wonder what the future’s going to be by next spring. It’s not the good old days.”

President Donald Trump announced the tariffs in March — 25 percent on foreign steel and 10 percent on aluminum — and by the time they took effect on June 1, prices were already spiking. A year earlier the administration slapped tariffs on Canadian lumber, which combined with other factors pushed the price to record highs.

So far, Statz said, his company hasn’t taken a hit to its bottom line.

“We just simply have to charge more, and it makes us look like the bad guys,” he said.

Others don’t have that option.

“It cuts into our margin,” said Geoffrey Hoffman, owner of Hoffman Manufacturing Corp. in Madison. “I think it’s one of those things where you just have to suck it up and eat it.”

Adding to his woes, he’s building a 38,000, square-foot addition.

“Our buildings are concrete and steel,” he said. “So the cost of my building just went up significantly because of all the steel.”

Hoffman makes retail displays, mostly out of steel, aluminum and plywood. He’s seen the cost of steel rise about 22 percent this year, and his overall costs rise by about 10 percent, “which is a lot for raw material,” he said.

His customers, which include companies like Trek, Gander Mountain and the University of Wisconsin, have long-term contracts that bind him to prices, at least until he negotiates a new round of contracts.

“Our customer costs go up, essentially,” he said, “so I guess it would become somebody else’s pain.”

There’s a lot of pain to go around.

Along with such big names like General Motors, 3M and Caterpillar, area manufacturers are coping with the fallout from tariffs and trade disputes that have no end in sight.

The tariffs have drawn bipartisan criticism. U.S. Rep. Ron Kind, a Wisconsin Democrat, and Sen. Ron Johnson, a Wisconsin Republican with a background in manufacturing, have blasted the tariffs as a drag on the economy and have convened informal hearings to allow business leaders to air their grievances.

“We certainly hear a lot of anecdotal evidence that the tariffs are having a big impact on individual businesses,” said Buckley Brinkman, executive director and CEO of the Wisconsin Center for Manufacturing and Productivity, a public/private enterprise that helps small and medium-sized manufacturers stay competitive.

At the same time, he said, manufacturing hasn’t taken a big hit.

“What’s been interesting overall is so far the manufacturing numbers in terms of activity haven’t been affected,” he said. “It’s still a really strong manufacturing environment. Indicators show that manufacturing activity is still strong.”

But how long that will last is anyone’s guess.

“If you’re taking a 30 percent hit as a manufacturer that’s a significant part of your cost structure you certainly can’t hold the line for very long, which means ultimately the consumer is going to pay the bill for that,” he said.

And if prices rise, demand is likely to fall.

“That’s the way it usually works,” Brinkman said.

Tom Wick has already noticed the trend.

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Wick is the president of Mazomanie-based Wick Buildings, a maker of industrial and institutional metal buildings. He said steel makes up at least 40 percent of his raw materials costs, and he’s paying 15 to 20 percent more for it since the beginning of the year.

“We’ve been forced to raise the price of our products several times to keep up with the lumber prices and the steel increases,” he said.

He said he’s already seen prospective customers walk away.

“If you budgeted $50,000 for a project and all of a sudden you’re 10 percent higher, where do you get that from?” he said. “It causes people to take a second look.”

But some steel-dependent manufacturers see the silver lining.

Jeff Burbach, CEO of Trachte Building Systems in Sun Prairie, one of the nation’s largest manufacturers of steel self-storage units, said he’s paying 30 percent more for steel since last year. But he hasn’t yet felt the full impact.

“We have the luxury of having contracts where we’re not locked into pricing for months and months and years and years at a time,” he said. “So we do have the ability to be able to recover at least some of the increase in steel costs.”

So he’s hopeful that businesses can ride out rising costs while the tariffs do what they were designed to do: Level the playing field for U.S. steel producers.

“If at the end of this we can come up with some way to level the field a little more when it comes to the international supply of steel and that type of thing, I think it could be a good thing,” he said.

Hoffman, of Hoffman Manufacturing, sees a different kind of silver lining. But it doesn’t have anything to do with tariffs. He said he’s likely to see a windfall from the GOP tax bill passed late last year, the benefits of which fall largely to the wealthy.

“It’s going to have a huge benefit that will probably offset the higher material costs,” he said. “It’s great for me personally.”

But he doesn’t consider the “tax cuts for the rich,” as he calls them, to be good policy.

“The tax cuts don’t help any of my employees,” he said. “They’re not benefitting at all.”

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Steven Elbow joined The Capital Times in 1999 and has covered law enforcement in addition to city, county and state government. He has also worked for the Portage Daily Register and has written for the Isthmus weekly newspaper in Madison.