Tariffs are taxes imposed by a government on imported goods or services. They are usually intended to protect domestic industries from foreign competition, raise revenue or achieve some political or strategic goals.
However, tariffs also have consequences for businesses, both at home and abroad. Tariffs affect businesses in Baltimore, Maryland, because our city relies heavily on international trade and has a thriving port.
Baltimore, a port city
Baltimore is one of the largest and busiest ports in the United States, handling more than 21 million tons of cargo worth $28 billion in the first half of 2018. The port supports more than 13,000 direct jobs and 127,000 indirect jobs in the region.
The port also serves as a gateway for many industries in Maryland, such as manufacturing, agriculture, aerospace, defense and biotechnology.
Tariffs
However, the port and its related businesses have been facing uncertainty and disruption due to the tariffs. Recently, these tariffs have been on steel and aluminum imports from various countries, as well as the retaliatory tariffs imposed by China and other trade partners on a range of U.S. products. And, there are several effects of tariffs on Baltimore businesses.
Higher costs
Tariffs increase the cost of imported inputs, such as steel and aluminum, which are used by many manufacturers in Baltimore.
For example, Marlin Steel Wire Products, a company that makes custom wire baskets and sheet metal products, has seen its steel costs rise by 25% due to the tariffs.
These higher costs may force some businesses to raise their prices, cut their profits or reduce their workforce.
Lower demand
Tariffs also reduce the demand for exported goods and services as foreign customers face higher prices or switch to alternative suppliers. For example, China has imposed tariffs on U.S. soybeans, which are a major export commodity for Maryland farmers.
As a result, soybean exports from Baltimore have dropped by 80% since July 2018. Similarly, other sectors that rely on exports to China, such as seafood, automobiles, chemicals, and machinery, have also seen their sales decline.
Supply chain disruption
Tariffs can also disrupt the complex and interconnected supply chains that many businesses depend on. Some companies that export finished products may lose their competitive edge due to the higher costs of their inputs. In either case, tariffs can affect the quality, quantity, and timeliness of production and delivery.