How Trump’s Liberation Day Tariffs Work in Practice

Liberation day shut down a big North Carolina sawmill when China retaliated.

They Voted for Trump. Look What Happened.

Bloomberg reports They Voted for Trump. His Tariffs Took Down Their Family-Owned Sawmill by Rachael Lewis-Krisky, Shawn Donnan, and David Gura.

For years, Mackeys Ferry Sawmill in North Carolina relied on exporting its goods to China and Vietnam after a dip in domestic demand for high-quality hardwood. But President Donald Trump’s trade war with China dealt a blow that the mill’s owners say they couldn’t come back from. In July, just months after the president announced his “Liberation Day” tariffs, they decided to shut it down.

Podcast Transcript

Gura: J.W. Jones is a sawmill in Elizabeth City, North Carolina. From stripping off the bark and sawing, to trimming, sorting, and drying the wood in kilns. Every day the mill turns dozens of logs into processed lumber boards. The kind used in the visible wood in a house, like your baseboards or stair treads.

Donnan: It’s a mill that has been there and in this family since the 1930s, the J.W. Jones Lumber Company focuses really on Southern Pine.

Gura: The Jones family has been in the lumber business since 1882. Today, brothers Wilson and Stephen co-own two lumber mills: Stephen runs J.W. Jones. And Wilson runs Mackeys Ferry Sawmill. And while the J.W. mill was as loud as ever, Mackeys Ferry sounded very different.

Wilson [Sawmill]: I’ve grown all my life in the lumber business. And to hear nature at a sawmill, I think for any lumberman is not natural. I don’t wanna be overly dramatic, but in a way it’s as unnerving as watching a loved one take their final breath.

Gura: On July 1, the brothers decided to close down Mackeys Ferry. The tipping factor? President Donald Trump’s so-called “Liberation Day” tariffs.

Wilson:  When I say Liberation Day, I cannot put enough snark and sarcasm in my voice because we weren’t liberated.

Gura: Wilson said they’ve “mothballed it,” meaning they’re maintaining the mill for potential use, or maybe to sell it. But altogether its production has shut down. And the 50 people who worked at that mill were laid off.

Wilson:  Liberation Day, it did, at the time, it had damn near liberated me from our business. And in essence, it has. I’m bitter about that.

Gura: After Trump announced sweeping tariffs on April 2, several countries responded with retaliatory tariffs, including China. And that hit Mackeys Ferry hard. Until recently, 70-80% of the wood coming from the Mackeys Ferry sawmill was going to China and Vietnam (a primary market for U-S hardwood). While most of what comes out of the brothers’ other mill (softwood) ends up in the United States. After calculating the staggering cost of exporting lumber, the Jones brothers decided it was time to stop production at Mackeys. About a third of their overall business revenue disappeared.

Donnan: This is not just a story about a sawmill in North Carolina and a little crossroads of a place. This is a story about what’s going on in a lot of rural America right now.

Gura: Since April, Trump’s tariffs have shocked supply chains, and raised prices of both imported and domestic goods. While President Trump has promised a “manufacturing renaissance”, between April and August the US actually lost 42,000 manufacturing jobs.

Mish: Gee who couldda thunk? Prices up, manufacturing jobs down. No one could possibly have predicted this.

Donnan:  They are the first generation in five to have to close something down in this lumber industry. Wilson’s a man in his sixties. He’s a storyteller, but he’s also, you know, a proud man. And he had tears in his eyes as he was describing this.

Wilson: In the old days, you would hear the chipper. We’d have the air compressors going. You’d have the roar of the fans of the kilns that ran 24/7. And you come in here and you’d hear all that throaty noise  or that hum and roar. And now it’s, it is kind of depressing because you can get outta your car and shut the door and then you hear the wind blow.

Gura: The Jones family has been in the lumber business in North Carolina going back nearly 150 years. … But consumption of lumber in the US peaked in the late 1980s and it’s been dipping ever since. That’s led to a steady decline in the number of US sawmills – many of which are small family-owned operations. And American consumer tastes have shifted toward cheaper furniture made from particleboard, MDF or laminate, commonly used by companies like IKEA and Amazon.

Wilson:  My wife and I have a young couple that we’ve talked to. They were so happy that they got a new sofa for the new house from Amazon for $400. But I understand, you know, that people like IKEA which has made, you know, with particle board and putting together compared to, you know, a custom built cabinet or, or, or something like that. I don’t have a problem with changing consumer tastes. I don’t have a problem that there’s a different technology that is better than what we have. Or that makes us obsolete. I don’t have a problem with that. I have a problem with the government policy making us obsolete.

Gura: Even before Trump’s tariffs were on the scene, U-S hardwood lumber was still in a tough spot. Mackeys Ferry mill – which the Jones family bought in the 1980s – initially served North Carolina’s furniture industry. But when that industry started facing competition from China and going offshore in the 1990s their market changed and by the early 2000s they were sending most of their lumber overseas. By 2008 as the financial crisis hit the housing industry and the main market for their softwood mill, the hardwood operation was keeping the family business afloat by selling most of its output to China.

Donnan: These are narrow margin businesses. There is not a huge premium on this wood. And in fact, you know, one of the ironies of the global economy is that Wilson Jones will tell you it costs more to ship a load of lumber to the port in Norfolk than it does to ship it from Norfolk to a port in China.

Gura: According to Wilson, the Mackeys Ferry mill was regularly shipping millions of dollars in hardwood to their biggest customers in China and Vietnam. The Joneses had moved with the times: By 2017, China became the largest single market for exported lumber from the US, followed by Mexico and Canada. And when the U-S imposed an escalating series of tariffs on China in 2018 — during Trump’s first term — the Joneses managed to weather the fallout, even as China retaliated.

Wilson:  We just kind of took it with our lumps

Donnan: Yeah.

Wilson:  And said, all right, you know what? I tell you what? We bore half of it, of the tariff. And then our customer, they bore half of it. And that was kind of an industry-wide thing.

Gura: But Trump’s second term tariffs were even more aggressive. On April 2, the president announced a higher 34% tariff on Chinese imports. China, along with several other US trading partners, retaliated again. It would kick off a rapidly escalating trade war that sent shockwaves through global markets.

Gura: For American hardwood, the reciprocal tariffs got as high as 125%.

Donnan: What took you over the edge here? What caused you to to, to shut this down?

Wilson: Honestly, the market conditions in relation to the retaliatory tariffs that we have in China. They put the final nails in the coffin.

Donnan: But the final nail in the coffin-

Wilson: Was when we couldn’t sell the lumber.

Gura: When President Trump imposed tariffs back in April, wood from Mackeys Ferry worth some $500,000 was on its way to China as part of a regular shipment. Within days that shipment was facing tariffs worth more than the wood itself.

Donnan: If President Trump pulled up here today and you walked him into the sawmill. What would you tell him?

Wilson: Well, I’d like to say, What the heck? Actually, I’d like to say about nine different explanatives. But, you know, President Trump, gee, I understand what you’re trying to do, but you’re on a fool’s mission. And you’re not helping out a few. You’re hurting a lot. If you put all these little communities together from Maine over to Michigan,  down to Mississippi and Alabama, it’s having the same effect on these small little communities. From the guy that’s just stacking lumber to the guy that’s sawing – don’t even care about the guy that’s the mill owner – what about those guys?

Mish: Wilson is not a farmer. Trump does not give a damn about any other small businesses.

Gura: The White House did not respond to a request for comment.As the brothers criticized Trump’s trade policies, Shawn asked them if they voted for him and for those trade policies to begin with.

Stephen: I voted for Trump because there was no alternative, I mean, at all.

Donnan: Did you vote for him all the way back to 2016 or did you…?

Wilson:  I voted for Trump all three times.

Trump:  …Large amounts, tremendous amounts of the soybeans and other farm products are gonna be purchased immediately, starting immediately…

Wilson:  You hear Main Street and you’re talking about Main Street in Columbus, Ohio. You’re not talking about Main Street in Roper, North Carolina. I can say my relatives that are in farming, they don’t want to bail out. And I would be willing to bet my industry colleagues in the hardwood lumber industry, they don’t want a bailout. They want access to their markets. And that door has been shut.

Kelly Chesson: Well, I’m Kelly Chesson. I’m the Economic and Strategic Development Director for Washington County.

Gura: In the county where Mackeys Ferry is located, the damage from the mill’s closure has already been done.

Chesson:  It is a big blow, especially now, you know, after COVID everybody kind of was on stall during COVID, but then just to see one of your longest standing businesses closes doors and, you know, 50 guys are going, men and women are gonna lose their jobs. Yeah, that is a blow.

Gura: Mackeys Ferry was one of the largest private employers in the County. Kelly doesn’t know what this will cost the local economy yet in lost business taxes.

Chesson: It’s not as a significant blow as the Weyerhaeuser blow was for us, but it’s still one of those ones that’s gonna be felt in the community. So that was 20 years ago. We still haven’t recovered from that. People want stability. And then when you have major companies like Mackeys who’s been here for over a hundred years, close, what does that say to the business viability here in Washington County? 

Gura: The Supreme Court heard arguments earlier this month on the legality of the tariffs. Lower courts have ruled that they’re illegal, and Shawn says it’s still unclear what restitution would take place if the Supreme Court agrees.

Donnan: Not all of that economic damage – if you talk to economists, people in business, small business people – is gonna be fixed immediately. There is no easy solution to repair that. For the Jones Brothers, this is kind of too late. The story of tariffs is often a story of unintended consequences. Donald Trump did not intend to cause the shutdown of a sawmill in North Carolina when he imposed these tariffs on China. He was trying to rebalance an economic relationship. In his mind these tariffs are gonna help bring back manufacturing jobs. But the story of tariffs through history has always been that they lead to retaliation and unintended consequences.

Donnan: Do you have any regrets about voting for the man?

Wilson:   There are some things I regret about voting for President Trump? Yes, a hundred percent. Trade policy is one of them, even though that I wish he could have moderated his tone. Well, I understand you have to do one thing to get elected and then something else, but I wish it hadn’t have turned out that way. That being said, given the two people running, regardless of what they said on the campaign trail, I would’ve voted for President Trump again.

Gura: The last board at Mackeys Ferry Sawmill came off the production line on September 29. Wilson and Stephen laid off 50 people, some of whom had worked for the mill for decades.

Donnan:  I write about economics. Economics is data. It’s aggregate data. And we often lose sight of the fact that, that economics is people. An economy is its people, it’s not, its economists. Wilson Jones is, is one of those people.

End Transcript

OK do you feel sorry for this sawmill and the 50 people who worked there for decades?

Not that it matters, but I do.

Yet, part of me wants to scream “You voted for this”. And another part wants to scream “I told you so.”

And how can I forget “Trade wars are good and easy to win.”

Oh, and what about “Tariffs cause prices to go down.”

What Should We Make of the Biggest Trump Tariff TACO Yet?

On November 15, I asked What Should We Make of the Biggest Trump Tariff TACO Yet?

Trump is rolling back tariffs. I am laughing, not complaining.

Best Comments of the Day

• “It’s certainly a step in the right direction, but it’s important to recognize that the pain that American working families and businesses feel from tariffs goes way beyond coffee and bananas,” said Jake Colvin, president of the National Foreign Trade Council.
• “By admitting that lowering tariffs will lower prices for U.S. consumers, the Trump administration is acknowledging what economists have pointed out all along: tariffs raise prices,” said Erica York, vice president of federal tax policy at the Tax Foundation, a think tank critical of tariffs.

Worst Action of the Day

In their place, the administration has expanded other tariffs on individual industries like steel, aluminum and automobiles based on more established national security law—Section 232 of the Trade Expansion Act of 1962.

Steel and aluminum tariffs do far more damage than food tariffs. The latter mostly just raise prices. Steel and aluminum tariffs cost jobs and destroy small businesses unable to escape the tariffs.

There is no way to pay back all of the small businesses Trump put out of business with his hugely damaging steel and aluminum tariffs, and tariffs on parts used by those businesses.

I am laughing at banana stupidity, now reversed, and also at the stupidity of Trump’s rants. But his other tariffs are no laughing matter.

Do Tariffs Cause Price Hikes? Studies Say Yes and No

Yesterday, I penned Do Tariffs Cause Price Hikes? Studies Say Yes and No

Let’s investigate two studies. Can they both be right?

Reduced Employment and Lower Growth

Both sides agree that tariffs reduce employment and lower growth.

I am on board with that. Hello Trump!

No! Tariffs do not cause prices to go down. However …

I suppose, in a roundabout way, tariffs will eventually lower prices.

Q: How so?
A: Tariffs will first raise prices (as noted by the Tax Foundation), while killing jobs and slowing the economy (as both agree), thereby reducing demand which eventually lowering prices.

Logically Speaking

Tariffs do not lower prices, they raise them. It’s the accompanying loss of jobs, loss of productivity, slowing of the economy, and the collapse in demand that eventually results in lower prices – not the tariffs directly.

Did you catch the key point of the Bloomberg article?

In case you missed it …  “This is not just a story about a sawmill in North Carolina and a little crossroads of a place. This is a story about what’s going on in a lot of rural America right now.“

I have been discussing this all year. Small businesses are getting killed by these inane tariffs.

Did you vote for that? The sawmill owners did. Perhaps they should hang a sign on their closed mill “I voted for this!”

“I voted for Trump because there was no alternative, I mean, at all,” said one of the mill owners.

You, see there was “no alternative” than to vote yourself out of business.

All 50 of these people would have been better personally off under Harris. But they did their allegedly patriotic duty to lose a $500,000 lumber shipment in one swat and sink their business.

” … I don’t have a problem with that [competition]. I have a problem with the government policy making us obsolete, said Wison.”

Then don’t vote for such people, in either party!

There was an alternative. Demand something better than two idiots. It’s why I wrote in Mish. Anyone who voted Libertarian or wrote in themselves or a friend can honestly feel like they did the right.

Oh wait, there’s just one more thing: Trump Adopts Chicago Cubs’ Perpetual Message, “Wait Till Next Year”