Retaliatory Tariffs Painful, Committee Told

In West Virginia, where the first House Ways and Means Committee hearing of the new Congress was held since the Republicans won the majority, the members asked questions of business owners, and were hosted by a mid-sized business that sells hardwood lumber to furniture makers, cabinetmakers and flooring manufacturers.

Allegheny Wood Products' Tom Plaugher, vice president of operations at the 800-person company, told Rep. Darin LaHood, R-Ill., that the 25% tariff China put on its exports led directly to the closure of two mills.

"It was so devastating to our industry, to make our products uncompetitive in those marketplaces," he said. While the company exports to 30 countries, China is 60% of its export market. Allegheny had to accept less than it had been selling its wood for in order to retain the business. He said most hardwood exporters, to stay in business after the Chinese retaliatory tariffs were imposed, "were operating at a loss to try and keep their employees to keep their business going and to just survive that period. I understand the reasons for the tariffs and what was trying to be accomplished there. But when you're caught in the middle of that, it's an extremely uncomfortable place to be."

LaHood, who has been chosen for the House Select Committee on China, asked Plaugher what he thinks Congress should do as it tries to deal with "the malign activities that China is engaged in all around the world."

Plaugher said it's above his pay grade. However, he said, "just about everything that we buy in the store" comes from China. In fact, about 18% of U.S. imports are Chinese. "If you are in a position to deal with that controversial foreign power, where does that leave all of us, who are depending on those goods? And a company like us, depending on that trade?"

Committee Chairman Jason Smith, R-Mo., said he chose Petersburg, West Virginia, as the site of the first hearing because Congress "has drifted from the needs of these good people. We must course-correct. We must prioritize the voices in rooms like this one, and not those of the Washington political class."

He said he wonders if President Joe Biden will "bother to mention the supply chain" in his State of the Union speech Feb. 7. "Small businesses waiting for parts and equipment on backorder know that our supply chain issues haven’t been solved. The struggle means lost revenue for businesses, smaller paychecks for workers, and higher prices for families. Instead of negotiating trade deals to bring supply chains home and sell more American goods abroad, the Biden Administration is out to lunch," Smith said.

Plaugher said "American businesses were left to pick up the pieces" when the supply chain faltered during the pandemic. "It looked like there were things the government probably could have done to help the supply chain run smoother and there wasn’t really any action taken on that," he said.

The administration did try to ease supply chain woes (see 2110130036), and Congress did, too (see 2111170073), including by passing the Ocean Shipping Reform Act (see 2206140047). Plaugher said a lot of unfair things happened during the crisis in shipping, both to importers and exporters. He noted how it was hard to get a container to send hardwoods to Asia, because carriers would rather send the containers back empty to turn around faster with more imports.

"Demurrage costs -- you were stuck with them. You had no way to argue them or to deal with them," he said. "Just another cost you had to deal with, for somebody else’s incompetence."

Rep. David Schweikert, R-Ariz., asked Plaugher if domestic furniture production could return with automation. He said the company tried operating a heavily automated plant to cut wood to certain sizes and shapes for furniture. "At the end of the day we could not compete with that cheap labor," he said. He said that Vietnamese furniture factory workers only earn $250 a month. And, he said, until the pandemic, he could ship lumber more cheaply to Shanghai than he could ship it to Chicago.

"That’s why American furniture companies have turned into design and marketing companies, not furniture manufacturing companies," he said. He said the sector left the U.S. 20 years ago.

Only one Democrat attended the Feb. 6 hearing three hours from Washington -- Rep. Don Beyer, D-Va. He told the audience that although "the consequences of the energy transition and globalization are often felt first and hardest in communities like this one," there is economic development coming to West Virginia as a result of the Inflation Reduction Act and infrastructure package. He pointed to a new electric school bus factory, more than one new battery plant, a clean hydrogen hub. He also said that homeowners will be able to replace furnaces with electric heat pumps and other more efficient appliances, which would save them hundreds of dollars in utility costs a year -- and if they meet income requirements, they will be able to buy those products at a significant discount.

Rep. Lloyd Smucker, R-Pa., criticized the fact that most Democrats did not travel back to Washington early so they could attend the hearing. He also said that Beyer was out of touch when he talked about making it easier to install solar panels, or other green energy benefits, which Smucker characterized as "government handouts."

"It's not what you want," he said, summarizing the messages the witnesses sent about what their businesses needed -- getting inflation under control, ending the fentanyl and opiate abuse crises, cutting government programs so people will choose to go back to work, and focusing on domestic energy production.