In Louisiana, Trump’s Trade War Spooks America’s Biggest Port

To understand what a trade war means for America, go to the
Mississippi. Follow the mud-brown river past Louisiana’s chemical
plants, oil refineries, granaries, ports, and the rail networks and
highways that spring from its fingers.

Over centuries, trade on the winding waterway hailed as the great
spine of the U.S. built hundreds of communities. Most U.S. grain, nearly
a quarter of its coal, and much of its petrochemicals pass through
here. But the river carries not only goods—it also carries consequences.

Although Donald Trump garnered more votes from Louisianans in 2016
than any other presidential candidate in history, his promise to put
America first targets the heart of its commerce. The U.S. imposed steel
and aluminum tariffs on Canada, Mexico and the European Union among
others; Trump has threatened to add charges on up to $450 billion in
Chinese goods, with the first round targeting $34 billion commencing
July 6; and the erstwhile partners are retaliating. Louisiana’s reliance
on trade makes it a unique microcosm of how the tariff battle will
affect America.

“Everything came from the Mississippi. It was the entryway to the
heartland of the United States—that’s been the case since the city’s
founding,” said Marc Morial, a former New Orleans mayor whose father was
the city’s first black mayor; he grew up hearing stories of life on the
sea from his uncle, who worked on a freighter. “All of the elements of
the ecosystem are affected when you have a slowdown in trade. And that
nerve system is what people don’t always necessarily see.”

A trade war would weigh on Louisiana, slowing total economic output
by a minimum of 7 percent over five years, the most of any state,
according to the Federal Reserve Bank of Dallas. One in six jobs in the
state of 4.7 million is tied to international commerce and would be at
risk, threatening an unemployment rate the U.S. Labor Department pegs
near an all-time low.

The Port of South Louisiana is a trade juggernaut, handling the most tonnage of any U.S. port.

In the trade complex that snakes 54 miles from Baton Rouge to New
Orleans, interdependence is made manifest. Barges filled with Japanese
steel could offload at factories along the river and then head, as empty
containers, to the South Louisiana port, where they’re cleaned,
serviced and filled with soybeans destined for China.

Farmers rely on the port: About 60 percent of their exported
soybeans, corn, wheat and rice pass through. Refiners import 56.6
million short tons of crude oil, and it’s a conduit for petroleum, which
composes a quarter of the value of state exports.

“People have no idea what’s going on on the other side of that
levee,” said port Executive Director Paul Aucoin, nodding toward the
grassy ridge beyond which 800 vessels can ply his portion of the
Mississippi at any time. Tariffs, he said, “could cause a drop in
tonnage, a drop in crops, a drop in everything.”

Consequences can already be seen. Aluminum shipments through New
Orleans are half what they were at this time last year, according to
Harbor Intelligence, an analysis firm. In the first quarter, the amount
of traded goods slowed along the Port of South Louisiana: Animal-feed
exports declined 31 percent from the same period last year, soybean
exports are down 20 percent, and imports of chemicals and fertilizers
have been halved.

The slowdown doesn’t bode well for the half-million Louisianans whose jobs rely on that flow of goods.

A 30-minute drive from Baton Rouge is Pipe & Steel Industrial
Fabricators Inc. in Denham Springs. The company’s’s founder and
president, Kylie Sparks, is a Trump supporter who’s proud to use only
American metal; he’s also paying as much as 40 percent more since
January as traders bid up the prices betting on a crunch. In fact, U.S.
manufacturers report that input prices are rising at the fastest pace in
seven years, according to the Institute for Supply Management.

Tariff threats have “changed our business model overnight,” said
Sparks, standing in a shed several stories tall as a dozen men cut and
welded steel. He spends more time negotiating: When bidding for refinery
contracts, for example, he can guarantee the price only for three days.
It used to be 30.

About half the company’s business relies on foreign enterprises,
including Taiwan’s Formosa Plastics Corp., whose sister company Formosa
Petrochemical Corp. is starting a $9.4 billion complex in nearby St.
James Parish. Indeed, Louisiana is the nation’s highest recipient per
capita of foreign investment. More than 500 companies from 50 countries
have spent $60 billion in the past decade in the state.

Those ties have helped Sparks prosper. He started the company two
decades ago and lived on a trailer on the gravel lot. Now, it’s expanded
so much that he uses a golf cart to get around the grounds. He still
has the white truck from his days welding pipes post-military service,
but added a Jaguar F-type convertible in the same color.

Sparks still supports Trump. He’s likely not alone: Livingston Parish
had the state’s third-highest share voting for the Republican candidate
in 2016.

“I agree with Trump making a better deal with people and not selling
us down the road,” Sparks said. “But the fallout is going to be
inflation, and I don’t know if he has a plan for that.”

From Denham Springs, head south to Lutcher. The 3,000-odd residents
of the former sawmill-and -sugar-plantation town are so familiar with
one another that their dogs run free on its streets. Here, in a United
Steelworkers meeting hall, it’s clear that unencumbered free trade has
put some Americans in a lose-lose position.

A group of union workers sits around a fold-out table, preparing for
contract negotiations with Rain CII Carbon LLC. The plant in nearby
Gramercy produces calcined petroleum coke, used in aluminum that ends up
in products, including the beer cans that some workers hold as
colleagues set up a crawfish boil.

“Factories shut down and move overseas to get cheap labor and don’t
have to play by the same rules—that’s what hurts people,” said David
Habisreitinger, a father of three who’s a control-room operator at Rain
CII Carbon. The fear that his job may be moved elsewhere is constant but
hits hard during every negotiation; if he and union members push too
hard, it becomes a real risk.

Sure, free trade agreements meant increased investment from abroad
and more customers—44 percent of Louisiana’s exports in 2016 were made
to countries with which the U.S. has free trade agreements—but it also
meant global competition for the cheapest prices.

China and other countries increased shipments of goods to the U.S.,
often undercutting local companies that closed or moved production
abroad. About 4.5 million manufacturing jobs have been lost in the
country since the North American Free Trade Agreement came into force in
1994, for example.

There’s been little change felt here since Trump was elected in 2016.
Tariffs could help a small sliver of industries, maybe even theirs, but
hurt nearly everyone else. Any Nafta renegotiation, which could assuage
some of these unionists’ concerns, feels farther away than before.

Trump “said we’re gonna win so much, we’ll be tired of winning,” Habisreitinger said. “Well, I’m not there. Far from it.”

The Mississippi curves unexpectedly and often; adjust your course or
crash. That’s what Jay Lapeyre, president of Harahan’s Laitram LLC, is
trying to do.

Each of his products is made of dozens of components from around the
world, and tariffs would change the structure of every one of his
long-term contracts with clients and suppliers. He’d either eat the cost
or source goods elsewhere—but what happens if the new parts are a
slightly different size or shape?

For now, future investments are on hold.

“At every stage, this is just a bad idea,” said Lapeyre, 65. “The
lack of certainty puts a tremendous chilling effect on all decisions.
That uncertainty is what causes everyone to just delay and hold. Well,
when you delay and hold, you get a compound effect. What our delay and
hold means: revenue for someone else.”

Laitram started in the 1940s in New Orleans with Lapeyre’s uncle and
father, who patented a shrimp-peeling machine. Today, the company
employs 2,500 people across 30 countries with annual revenue of about
$650 million. It makes such things as conveyor belts and pasteurizing
equipment used by companies that include Amazon.com Inc., Kraft Heinz
Co. and Kellogg Co.

Among its locations is a plant with more than 150 employees near
Shanghai. A few years ago, Lapeyre noticed knockoffs of his machines
being used by former customers. But he’s willing to keep taking risks
abroad because that’s where the growth is, and free trade is what he
believes in.

Tariffs, he said, just mean that he’ll consider moving some production elsewhere.

Some companies can’t. Jacob Landry opened Urban South Brewery just
before Trump’s election, in a former warehouse down the street from the
Port of New Orleans.

Landry sublets a quarter of his space to a company that imports
brewing equipment, including the Chinese-made steel tanks he uses,
opting for a foreign supplier because it’s about half the price. Every
dollar counts at his small business, where the added expense on aluminum
cans this year alone is set to devour the equivalent of a local
worker’s salary for six months.

“These are real jobs in the community,” he said, sitting at one of
about a dozen indoor picnic tables as a Sunday afternoon line forms at
the taps. “At the end of the day, it’s just a lot of uncertainty.”

At the Port of New Orleans, the last major stop before the river
empties into the Gulf of Mexico, boat traffic has been unpredictable
lately.

“Somebody’s playing a game here, and I just don’t know what it is,”
said the port’s chief commercial officer, Robert Landry, as
city-block-sized barges glided by. “If you really want to kill business,
you don’t have to enact any measures. All you have to do is create an
air of uncertainty, and that’s what’s happened here.”

On that humid late-May day, thunder and lightning broke over New
Orleans, a gale lashing hard enough that workers put in overtime to send
out ships before they could damage the wharves. The state had issued a
tropical storm warning, which locals meet with a shrug—it could cause
widespread destruction or it could be just a lot of wind. A state
governed by the ebb and flow of ever-changing water is used to unknowns.