September 11, 2018 The Tariffs: View From the Trenches

While economy watchers are loud and clear on their disapproval of President Trump’s trade crackdown, one company says: “Wait, not so fast!”

September 7, 2018

By William Douglass, The Lex Group

When the Trump administration levied heavy tariffs against steel and aluminum imports last March, politicians, labor unions, manufacturers, the media and economy experts predicted dire results. They warned America’s production would fall and unemployment would rise.

So far, the pessimism seems to be premature. According to statistics from the Federal Reserve and the U.S. Labor Department, overall manufacturing output has increased along with the job rate. America’s ability to sustain any level of growth will depend on world markets that are fair and equitable. And therein lies the challenge we are facing today.

Only time will tell how the latest tariffs effect the domestic and world economies, but since my family began running the Lex Group, now in its 50th year as a leading steel distributor and service center, we have seen tariffs and quotas come and go numerous times.

China and other countries have dumped steel into the United States, the steel industry economically collapsed twice, and our manufacturing customers have been decimated through unfair trade practices as well. Tariffs and other trade barriers on their products imposed by China, the EU and other countries must be addressed. Steel prices are not the main factor. Open markets and unfair trade practices against United States have always been the driving force behind the deterioration of our industrial base.

Despite the steel industry’s constant fluctuations over five decades, our company has experienced consistent growth as a distributor of flat-rolled steel that meet the needs of North American manufacturers in a wide range of industries from household appliances and automobiles to aerospace.

My family and a group of investors purchased Lexington Steel in 1990 from the Maroscia family, who founded the company in 1968. At that time, it was a small steel service center on Lexington Avenue in Chicago. Under our leadership, the company immediately experienced rapid financial growth, doubling in size in the first five years. Since then, we formed The Lex Group and expanded distribution strategically throughout the midwestern, southern and western regions by establishing independent companies, LexWest and LexCentral. We also formed Douglass Logistics, a trucking company that hauls materials for major steel mills and numerous manufacturing customers in the Chicago area.

Our success can only be sustained by operating in a marketplace that supports fair and reasonable pricing and generates fair profits for the producers and manufacturers. In that scenario, tariffs are generally not a preferred solution. Right now, however, what is needed by the steel and manufacturing industries are world markets that are open to all American products. Currently, the trade balance is unfair and, as we see it first-hand, tariffs are the only vehicle available to achieve the desired result.

The United States is in a strong position to negotiate for free and fair trade. We are still largely self-sufficient, we are energy independent, and we rely less on exports than any of our trade partners. We are the market. We are the customer. In short, they have far more to lose than we do. We need to shift the paradigm. Post WWII trade practices are obsolete and American workers should no longer lose good jobs to foster growth in other countries. We need to focus on our country and our people which is coincidentally what we elect our leaders in Washington to do.

Bottom line: If the U.S. doesn’t take a stand against foreign trade barriers, the price of steel will be irrelevant because there won’t be any American manufacturers left to buy it. While we don’t expect everything to be perfectly in balance, we much prefer hearing our customers talk about issues like overtime and hiring more people. It’s been a long time since we’ve been able to hear that perspective.

Bill Douglass is president of LexCentral and president of Douglass Logistics, Inc. where he helps lead the company in delivering quality flat-rolled steel to multiple industries throughout North America. He began his career with the firm following graduation from the University of Illinois with a bachelor of arts degree in economics and finance. Before becoming president, he served as vice president of operations, purchasing manager and in sales manager positions.

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