Small and medium-sized American companies are suffering the most from the higher supply costs created by President Trump’s tariffs, and a tool meant to help them cope is instead aggravating the pain.
In late March, the U.S. Department of Commerce told businesses they could begin submitting requests for the government to exclude specific products or raw materials from double-digit tariffs, a process designed to avoid imposing undue costs on specific types of steel and aluminum products that can’t be found in the domestic market.
The turnaround hasn’t been quick: A resource-strapped Commerce Department now has a backlog of over 20,000 requests, and many small businesses are lost and confused.
Adding to the uncertainty, American companies are dealing with two entirely different sets of tariffs, each with their own exclusion process. Acting through the Commerce Department, President Trump slapped tariffs of 25 percent on steel imports and 10 percent on aluminum under a national security justification allowed by Section 232 of the Trade Expansion Act of 1962.
Separately, the White House used Section 301 of the Trade Act of 1974 to place a 25 percent duty on $50 billion worth of Chinese products, and Trump has threatened 10 percent tariffs on an additional $400 billion under the same law. Those are managed by the U.S. Trade Representative, which held a three-day public hearing in mid-May to let businesses testify about their need for exemptions.
That gave Mary Buchzeiger, president and CEO of Lucerne International, an automotive supplier headquartered in Michigan — a state to which Trump promised to return jobs — an opportunity to explain the quandary the array of levies has created. She addressed a special panel that included members of the House Ways and Means Committee, as well as representatives of the Department of Homeland Security and the U.S. Trade Representative.
When the tariffs were announced, Lucerne, a company with a little more than 50 employees and no in-house legal department, was forced to spend tens of thousands of dollars in a matter of six weeks to prepare exemption proposals for affected imports, Buchzeiger said.
“It’s like trying to reconfigure your whole business overnight,” she said. “It took up so much bandwidth in my organization.”
Buchzeiger had to hire lawyers with experience on Capitol Hill as well as a new government relations firm. In addition to preparing for her testimony, the company “had to put contingency plans in place” for different outcomes, she said.
Such policy moves by the Trump administration have made it extraordinarily challenging for small firms to invest in their futures — despite how good business has been in an era of economic growth and lower taxes.
Prior to the tariffs, Lucerne was considering opening new manufacturing facilities in Michigan, but that may not be a viable option amid the risk of rising supply costs and retaliatory duties from U.S. trading partners.
“It’s just really difficult to make any kind of long-term plans and long-term strategy for U.S. growth right now,” Buchzeiger said. Her company has begun to focus on growth plans in Europe and Asia rather than the U.S., exactly the opposite of the outcome the Trump administration wants.
Compounding the problem is the process for seeking exemptions. Although the Commerce Department allows that on an ongoing basis, its system is described by people familiar with it as “cumbersome and slow” or “chaotic and frustrating.”
In order to receive an exclusion, companies must submit a request for individual products rather than groups, which means a separate form must be filed for every grade, measurement and type of steel or aluminum needed. Once the requests have been filed, there’s a 30-day period for public comment before Commerce can sign off.
Bob Wren, the president of global metals-trading company Primrose Alloys, said one form — which includes chemical and engineering properties, measurements and import details — can take up to four hours to complete. His firm has submitted close to 5,000 of them, Wren said.
“We hired a new person, and that’s all she does,” he said. “At first we were all chiming in, but it just wasn’t getting done.”
Primrose employs about 30 people and, like Lucerne, the company has also had to spend money on D.C.-based lawyers to comply with the exclusion process.
Joe Rattner, the president of Dover Tubular Alloys, hasn’t had to deal with the forms directly: His suppliers handle the requests. He’s still concerned, however, that the backlog at the Commerce Department could lead to a logjam in the supply chain.
Mark White, the president of Shape Corp., an automotive supplier based in Michigan, questions whether the administration understands the effects of the metals tariffs on businesses like his, which purchase and import large amounts of raw materials.
The negative economic impact may outweigh the intended benefits to domestic steel producers, he noted. The tariffs are making it difficult to plan future production because companies in the automotive industry — which faces additional complications from separate duties proposed by Trump — work on projects years in advance.
“It’s a short-term disruption that takes you away from running your business with a long-term strategic intent,” White said.
Another unforeseen consequence of Trump’s policies is that they’re pushing companies from Main Street to Capitol Hill, forcing small firms like Lucerne and Primrose to dedicate time and money to working with policymakers instead of growing their businesses and creating jobs.
“I can’t afford to not be involved in politics from now on,” Buchzeiger said “We just have no idea where the administration is going to go next.”
