×

Tariffs Costing Local Companies Resources, Time

Tariffs are making life more difficult for the ownership of three Jamestown-area manufacturing plants. Some of the difficulty is monetary – but the one common thread for Cummins, SKF and NFI Group is the uncertainty associated with President Donald Trump’s tariffs.

The topic has come up in corporate conference calls the past couple of weeks.

President Donald Trump’s tariffs cost Cummins Inc. $22 million in the second quarter. NFI Group officials, meanwhile, say they could see a $10 million to $15 million tariff impact as they negotiate with customers while trying to pass tariff-related costs on to customers. SKF officials say their customers will see price increases that reflect the increased costs of tariffs on the goods SKF manufactures and sells around the globe.

None of the companies are terribly concerned about the economic costs of the tariffs. They also agree that tariffs are becoming a pain.

Mark Smith, Cummins CFO, told investor analysts earlier this week that tariffs cost Cummins $22 million in the second quarter of 2025. Company officials are trying to lessen the tariffs’ impact, but it’s been difficult so far.

“We’ve done a lot, as you can imagine, making choices about supply chain is hard when the international tariff dynamic keeps changing,” Smith said. “So it’s hard to make any decisions to shift when you’re not sure that we’ve reached a period of stability. So about $22 million negative, as we said three months ago, we didn’t expect the full impact until the second half of the year. That’s the case. So both the cost of Cummins and the degree of recoveries will be increasing in subsequent quarters. We expect to enter (the fourth quarter) on a much closer to price cost neutral on tariffs starting in the fourth quarter. But there’s a gap in (the second quarter), there will be a gap in (the third quarter). (The fourth quarter) will get close. But it’s hard to underestimate the amount of resources and time that this is consumed amongst all industry participants.”

U.S. President Donald Trump raised the tariffs on Canadian goods to 35% recently, according to the Associated Press, but a key exemption for Canada and Mexico shields the vast majority of goods from the punishing duties. Goods that comply with the 2020 United States-Mexico-Canada Agreement that Trump negotiated during his first term are excluded from the tariffs. Canada’s central bank says 100% of energy exports and 95% of other exports are compliant with the trade pact, known as USMCA. The Royal Bank estimated that almost 90% of Canadian exports appear to have accessed the U.S. market duty free in April. Canadian Prime Minister Mark Carney said the commitment of the U.S. to the core of USMCA, reaffirmed again last week, means the U.S. average tariff rate on Canadian goods remains one of its lowest, and over 85% of Canada-U.S. trade continues to be tariff free.

Paul Soubry, NFI Group president, told investor analysts tariffs will tie up roughly $10 million to $15 million in cash in the short term as tariff-related issues are negotiated with customers though the company isn’t including any tariff-related guidance in its 2025 financial analysis. Tariff-related costs should basically be a pass-through issue for NFI Group and its subsidiary companies, which include the New Flyer plant in Jamestown, as tariff costs are passed on to customers. But NFI Group employees are spending an inordinate amount of time dealing with tariffs that costs the company additional time and resources that don’t show up on a balance sheet.

“Of course it’s changing every bloody day depending on the impact of what we buy, where it comes from and the tariffs the U.S. applies to these different jurisdictions. So as we said in the script, we’ve been dealing with the direct steel and aluminum tariffs. It’s not massive, but we’ve been managing that and embedding in our price and then there’s no issue there or we don’t foresee an issue,” Soubry said. “The indirect taxes, as I alluded to, are really the biggest area of concern, because we see that through a supplier invoice. Here’s $8 for the windshield wiper, but then there’s an extra portion of invoice that relates to the tariff. And of course when the customer or the supplier provides that to us, we’re paying them on certain terms we are current with all of our suppliers, but there could be a lag between when we’re paying that and when our customer finally pays us for the tariff that we invoice. We are invoicing our customers separately.”

Trump signed an order last week imposing new tariffs on 66 countries, the European Union, Taiwan and the Falkland Islands, to go into effect Aug. 7, after he originally threatened them for April but postponed twice after that until Aug. 1. Trump has promised that his tax increases on the nearly $3 trillion in goods imported to the United States will usher in newfound wealth, launch a cavalcade of new factory jobs, reduce the budget deficits and, simply, get other countries to treat America with more respect.

SKF, which is headquartered in Sweden, a member of the European Union, is dealing with tariffs in much the same way NFI Group is dealing with them. Rickard Gustafson, SKF CEO, told investor analysts in mid-July that SKF is compensating for tariffs with price increases that should keep the financial impact of tariffs neutral to the company’s financial standing. But, the tariffs are contributing to economic uncertainty that are helping dampen SKF’s sales.

“Starting with the surcharges and how they work, they are rather time consuming,” Gustafson said. “So, our sales organizations across our businesses, they have spent a lot of time with our customers, negotiate, debating these charges. And then when there are changes to kind of the directions coming from the US administration, we have to go out there again and renegotiate. So, your question how sticky they are, well, a price increase is pretty sticky. Surcharges, as the name indicates, actually will either increase or decrease depending on where the tariffs go. And if the tariffs disappear, surcharges will disappear as well. So, that’s how it works.”

Starting at $3.50/week.

Subscribe Today