‘People are spooked’: Tariff uncertainty paralyzes some Georgia firms' plans

“Deals just can’t get done right now,” Fagan said. “(The tariff impacts) are making deals fall apart. People are spooked.”

A new 25% tariff on steel and aluminum imports into the U.S. took effect Wednesday, broadly hitting all American trade partners. The European Union responded with tariffs on billions of dollars in U.S.-made products.

“It’s really the uncertainty around the tariffs that might even be worse than the tariffs themselves,” Tom Park, national strategic supply chain vice president for global construction firm Skanska, said during a Tuesday webinar discussing the changing tariff landscape.

Credit: arvin.temkar@ajc.com

Credit: arvin.temkar@ajc.com

Tariffs, which are taxes on imported goods, are widely considered inflationary by economists. Many of the price hikes sparked by escalating tariffs are passed on to consumers.

President Donald Trump has downplayed the inflationary effects of tariffs while saying they are the best tool to rewrite trade deals and spur U.S. investment. He reiterated many of those arguments Tuesday during a meeting with roughly 100 CEOs at a Business Roundtable meeting, including the heads of many companies that have seen their stock values plummet as inflation and recession fears grow.

“The tariffs are having a tremendously positive impact,” Trump said during a public portion of the meeting. “ … The tariffs are going to be throwing off a lot of money to this country.”

While the U.S. will be able to collect additional tax revenue off imported goods, a trade war increases exposure to any tariffs other countries slap on American goods.

The EU levies hit U.S. industrial and farm products, including goods from Georgia. The EU targeted products including poultry, beef, eggs and vegetables, as well as steel and aluminum, textiles and home appliances. Soon after, Canada signaled plans for more than $20 billion in retaliatory tariffs against the U.S., The Associated Press reported.

“Tariffs, while often politically popular, have severe economic consequences,” Sina Golara, assistant professor of management at Georgia State University’s Robinson College of Business, said in written comments. “The effects will be particularly pronounced in trade-dependent regions like Georgia and in industries such as agriculture and manufacturing, where even small increases in export costs can be financially devastating.”

‘Dreaded word for economists’

The number of 100% American sourced and made goods is smaller than most people think, said Serena Crivellaro, managing director of the engineering and construction sectors for accounting giant KPMG.

The U.S. is the world’s top importer. Georgia just posted its fourth straight record year for international trade in 2024, nearly three-fourths of which was imports. The state’s top export partners are Canada, China and Mexico — the first three countries Trump levied steep tariffs against in his second term.

Crivellaro told Skanska webinar attendees the inflationary effects of tariffs combined with the potential recession they could spur has many economists fearing the worst.

“The risk of inflation and the risk of stagnating economic conditions is a dreaded word for economists,” she said. “That’s stagflation.”

Stagflation is when a country grapples with high inflation and high unemployment. Golara, who also said a prolonged trade war makes stagflation more likely, said it’s a tough economic condition to escape, since the typical policy responses to lessen inflation and reduce unemployment are conflicting. Raising interest rates to tamper down inflation worsens recessions, while lowering interest rates to stimulate the economy tends to spike inflation.

Unemployment remains low in the U.S. (4.1% as of last month) and Georgia (3.7% in December), and inflation has also lessened since the postpandemic surge. In February, inflation rose 2.8%, which was less than analysts expected. But Brian Coulton, chief economist at Fitch Ratings, said the situation “is not so reassuring,” because the escalating trade war’s impacts have yet to be felt.

“This is before tariff hikes start taking effect,” he said in an email.

Feeding trade

Agriculture, Georgia’s top industry, relies on trade. Modern farming produces far more chicken, peanuts, pecans and blueberries than just Americans can eat, leading to large amounts being shipped overseas.

The poultry sector — Georgia’s most valuable industry — has already taken a hit from bird flu.

“The imposition of tariffs has created a volatile environment for U.S. producers, and the ripple effects of these disputes are going to be felt across the entire supply chain‚” said the poultry export group’s president, Greg Tyler, in a written statement. He urged “all parties involved” to work toward a quick resolution to minimize damage.

Golara said agriculture is especially exposed to tariffs since produce perishes and it can be difficult to stockpile. In addition, climate is a limiting factor that has led certain countries to specialize in specific crops.

For Duluth-based tractor maker AGCO, tariffs on goods from China, Canada and Mexico have a relatively small effect, Damon Audia, the company’s chief financial officer, said in remarks during an investor presentation on Wednesday.

But then “you layer on steel and aluminum on top of that,” along with potential retaliatory tariffs, he said.

And, he said, the biggest risk for AGCO is the EU tariffs, because a significant portion of the company’s revenue comes from Western Europe. During the last round of tariffs, he said, the industry raised prices to pass on the increased costs.

“We’re running lots of iterations as to how do you minimize those costs if I can’t pass it through,” Audia said.

That could include changing supply chains or making other adjustments.

“We’re looking at a lot of different alternatives,” Audia said.

Atlanta-based Genuine Parts, an auto parts company whose brands include NAPA Auto Parts, aims to use its global scale and diversification to manage the tariff impact.

“We think that that insulates us probably a little bit relative to others,” said Genuine Parts CEO Will Stengel during an investor presentation Wednesday. Stengel said the company has gone through tariffs and inflation before, “and have been reflective on all the things that worked and didn’t work, that we’re as ready as we could be as we navigate this.”

Fagan, the Moore Colson partner, said someone has to eat the cost increases.

“When you’ve got tariffs on all steel and aluminum, you really can’t do anything,” he said. “You’ve just basically got to take it on the chin.”