Tariffs have Georgia companies caught in game of risk without knowing the rules

For AGCO, there’s also risk from countries retaliating against the U.S. But it’s still uncertain what tariffs would actually take effect and for how long, AGCO CEO Eric Hansotia during the company’s earnings call Thursday.

“I think a lot of this depends on what are the rules of the game going forward, what constitutes a tariff, what would be required to be local production and how long do we think it’ll be in place. Any kind of major footprint change usually takes a multiyear payback,” Hansotia said. “Until we get some clarity on stability and what are the exact rules and details, you know, we don’t expect to be making supply chain shifts.”

Trump put tariffs against Canada and Mexico on hold for a month after the countries offered to step up border enforcement. Each had announced retaliatory taxes on U.S. goods, which also were paused.

The U.S. tariffs on Chinese goods took effect Feb. 3, while China’s retaliatory moves took effect Monday, including tariffs on heavy farm equipment like AGCO sells.

Trump’s threats of tariffs against the EU also loom, along with planned reciprocal tariffs and tariffs on steel and aluminum.

While AGCO said the announced tariffs on China, Mexico and Canada “would likely have a minor direct effect on our financial outlooks,” ones on the EU “would influence our current financial outlook.”

Hansotia said AGCO has “plans on the shelf ready to go” if tariffs materialize.

Chief Financial Officer Damon Audia said the company is preparing for “an array of scenarios,” including U.S.-Canada tariffs.

“Do we shift the landing of some certain products into Canada versus the U.S.? We’re looking at things,” Audia said. Also under consideration is gathering parts and materials in the U.S. “without large-scale investments that may help us ease the short-term pain,” he added.

Credit: TNS

Credit: TNS

“We want to make sure we have some clarity before we actually execute any of these things,” Audia said. The company has not yet changed its sales forecasts, but “as things become clearer, we will update our outlook accordingly,” Audia said.

Still, in a sign the trade war could hurt, AGCO added tariffs as a risk factor in its Safe Harbor Statement for investors, noting “substantial uncertainty.”

‘We have no idea’

Executives at other Georgia companies discussed similar apprehensions during earnings calls.

Jeff Lorberbaum is CEO of flooring giant Mohawk in Calhoun.

“Let’s start out that we have no idea what they’re going to be, how they’re going to be executed and what’s going to happen,” Lorberbaum said in response to an analyst’s question Friday.

Lorberbaum, during the earnings call, noted Mohawk makes ceramic and luxury vinyl tile in Mexico.

“Both of those, we’re reviewing alternatives to move to other factories that we own, and we’re also looking at potentially outsourcing them,” Lorberbaum said.

Mohawk imports about $300 million of products from Mexico. It also exports about $200 million worth of products to Canada, he said.

“I think the imports we’re doing from Mexico, it’ll be a negative,” Lorberbaum said. But, “it might give us some positives manufacturing in the U.S. … It’s anybody’s guess what’s going to happen, since we don’t even know what it is.”

He said Mohawk is also moving its imports from China to other places, and exchange rates could offset some of the impact.

‘Competitively advantaged’

Trump used tariffs, particularly against China, during his first term in office, and former President Joe Biden kept them largely in place. The levies decreased full-time equivalent employment in the U.S. by 142,000 jobs, according to an analysis from the nonpartisan Tax Foundation.

The group predicts Trump’s new tariffs on Canada, Mexico and China, if fully implemented and kept in place permanently, would decrease employment by the equivalent of 330,000 jobs.

Still, other companies see a potential for carving out a competitive advantage as a U.S. manufacturer. Even then, there are potential negative impacts from tariffs and retaliatory tariffs for Georgia’s multinational firms with vast supply chains and global customer bases.

Sandy Springs-based Newell Brands sells everything from Sharpie pens and Coleman coolers to Rubbermaid containers and Graco baby strollers. Newell has been working to draw down its dependence on goods from China for years as a “tariff mitigation strategy,” according to CEO Chris Peterson.

“We began accelerating our efforts about a year ago,” through insourcing and shifting production out of China to other locations through suppliers, he said.

As a result, about 15% of what Newell sells are finished goods imported from China to the United States, including many of its baby products. But that’s on track to go down to about 10% by the end of the year, according to Peterson.

In his first term, Trump’s signature tax cut bill in 2017 boosted investment in the U.S. economy. Newell has invested nearly $2 billion in U.S. manufacturing since that time, he said.

“And so we’re trying to figure out how do we leverage, how do we scale up? We can hire more workers,” Peterson told analysts.

The investment in its U.S. manufacturing footprint “positions us to be competitively advantaged in certain product categories,” Peterson said.

Newell is also pushing some retailers that carry its products to shift their promotion slots or shelf space to products made in the USA as a way of insulating from tariff impact. Newell is also suggesting retailers should discontinue sales of generic products brought in from China.

“We’re getting some traction,” Peterson said.

“There is reason to believe that it could be a net positive for us over the midterm, because we have a very significant U.S. manufacturing base that we believe is competitively advantaged,” he said. “We compete against a number of players that are not manufacturing in the U.S.”

But on the flip side, “there is some headwind” from China tariffs and potential retaliatory tariffs from Mexico and Canada beyond the current one-month pause, he said.

So, whether tariffs will be a net positive or a net negative for the company is still “hard to predict,” Peterson said.

With that reality, Newell’s financial guidance does not yet include any impact from the announced yet paused tariffs on goods from Mexico and Canada or the tariffs enacted against China.

“As trade policy decisions come into view and solidify throughout the year, updates will be provided as appropriate,” Newell Chief Financial Officer Mark Erceg told investors.

Sandy Springs-based UPS is a longtime proponent of free trade given that its business relies on people and businesses shipping goods and products all over the world. The company launched a webpage to help businesses navigate the new landscape, though at the top of the page UPS cautions customers that policies are evolving.

Credit: Miguel Martinez-Jimenez

Credit: Miguel Martinez-Jimenez

Many of UPS’s target customers for its future growth are small- and medium-sized businesses that ship goods to customers. A survey of 3,718 small-business owners on the business networking website Alignable found that 30% of small business owners expect to lose revenue due to proposed tariffs, while 18% expect a boost in sales.

The UPS webpage advises businesses: “Knowing your alternative options is key to pivoting your supply chain” and includes a list of “U.S. Tariffs Frequently Asked Questions.”

UPS said it continues to provide shipping services in and out of China and Hong Kong, though it suspended its service guarantee for those shipments.

“Our priority is to help our customers minimize any disruption to business,” UPS spokesman Jim Mayer said in a written statement.

— Staff writer Mirtha Donastorg contributed to this report.