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Retaliatory Tariffs Loom Over 'America's Oldest Ice Cream Company'

Nov 3, 2018
Originally published on November 3, 2018 6:31 pm
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MICHEL MARTIN, HOST:

Next, we're going to hear a story of a very different business that you might not associate with tariffs - Bassetts Ice cream.

UNIDENTIFIED PERSON #1: Thank you, sir.

UNIDENTIFIED PERSON #2: Thank you.

MARTIN: They say they are the oldest ice cream maker in the country.

MICHAEL STRANGE: Our company was founded by my great-great-grandfather in 1861.

MARTIN: That's owner Michael Strange. He meets us at the bustling Reading terminal in downtown Philadelphia. It's in a huge indoor market featuring row after row of vendors selling everything from freshly butchered meats to handmade doughnuts to handmade soaps and everything in between. The market opened in 1893, and Bassets has been selling ice cream here ever since. Just don't make the mistake of calling it premium ice cream.

STRANGE: The term we use is super premium. And I didn't come up with that myself. But it's primarily based on the butter fat or milk fat that's in the product. Ours is a 16.5 percent milk fat, which lends our ice cream that rich, creamy, silky mouthfeel.

MARTIN: Before we got a chance to taste that super premium ice cream, we asked Strange to talk tariffs. They've been very much on his mind.

STRANGE: Tariffs are definitely affecting our international business, most particularly our shipments to China. The tariff increases that have been going on back and forth between the U.S. and China were applied to ice cream imports from the U.S. into China. We started shipping our ice cream to China in 2008, and at that time, there was a 19 percent tariff on our product, which is significant. But we were able to capture that tariff in our pricing and still grow our business there.

With the recent back and forth of increases in the tariff, China added an additional 25 percent tariff to ice cream imports from the U.S., making it a total of a 44 percent tariff on ice cream shipped from the U.S. to China. That is such a large and measurable number that I regret to tell you we have not shipped to China since the imposition of that additional tariff. We do have an order in hand from our China customer. He's a little more sanguine about the tariff increase than I am. He seems convinced that, sooner rather than later, both sides will roll back the tariffs after we come to some sort of an agreement. I am a little more pessimistic about whether or not these tariffs are going to be rolled back any time in the near future.

And, as a result of that, we are operating our business on the assumption that, while we have one order in hand that we expect to ship, I am operating on the assumption that that is going to be our last shipment to China until such time as those tariffs get rolled back. I hope I am wrong, and I could well be wrong. But, as of right now, we're running our business assuming China is no longer going to be a viable market for us.

MARTIN: Now, some people we met in Pennsylvania like the folks at American Keg told us they are optimistic the tariffs will help bring business back to the U.S. and revitalize their companies. So we asked Michael Strange why he doesn't see it that way.

STRANGE: Well, the thought as to whether or not implementing tariffs on China will ultimately cause them to reduce tariffs on U.S. products imported to China - that's above my pay grade. I don't know if that plan is going to work or not. But I do know that, in the short term, it is measurably affecting our total business. It would mean that we would have to lay people off if the other components of our business weren't growing as rapidly as they are. So we don't expect to lay anyone off. But, by the same token, we will certainly delay hiring anybody.

MARTIN: With the elections just a few days away, Strange told us that he doesn't like to get involved in politics, but he is hoping Democrats take control of Congress so they can push back on the president.

STRANGE: I'll be very candid. And I don't know whether you'll put this on the air or not, but I honestly - I question a lot of what our current president does. And I think a lot of it is just shooting from the hip, knee-jerk reaction without deep, considered thinking. And, honestly, I don't think he's really thought it through. I think he is shooting from the hip, and it is what makes Donald Trump feel good is what our policies are. To be honest with you, we're just a little company. My sales are a tiny, tiny fraction of what most international companies enjoy. But it's an important topic for me.

MARTIN: That was Michael Strange, owner of Bassetts Ice Cream in Philadelphia. Now, we wanted to talk more about how tariffs are affecting the business environment, so we called NPR's Uri Berliner. He's a senior editor covering business and the economy. Uri, thanks so much for joining us.

URI BERLINER, BYLINE: Sure thing.

MARTIN: So we just heard from two business leaders. One is a supporter of tariffs, and he said he's cautiously optimistic that they will help. That was Paul Czachor, the CEO of American Keg. But he's had to lay off workers. And then the other, Michael Strange of Bassetts Ice Cream, has not had to lay off workers, but he's clearly worried, and he's vocally opposed to more tariffs. And they both say that they are very uncertain about what is in store. So the first thing we wanted to ask is, is this uncertainty something that you are hearing, you know, across the country, you know, apart from these two guys that we talked to?

BERLINER: Well, yes. There's a tremendous amount of uncertainty ranging from the very largest companies - companies like Ford and GM - to small companies like this keg maker because no one really knows where things are going. It was just in late September that the Trump administration imposed the last very big batch of tariffs on China - tariffs on $200 billion worth of Chinese goods. That's a lot. That's a huge move.

But we don't even know where this is going. President Trump spoke by phone with Chinese President Xi Jinping this week about trade. He said they had a very good conversation. They're supposed to meet later this month in Argentina at a summit, the G20 summit. Maybe there'll be some progress there. But if there isn't - if these two countries continue with the standoff - there's just tremendous uncertainty about where this goes.

MARTIN: Is there any sense of winners and losers so far?

BERLINER: Yes. U.S. steelmakers, companies that make steel, say they are benefiting from the tariffs - companies like U.S. Steel and Nucor. There are a lot of companies that are paying a price from the tariffs already. And what we're seeing mostly because they were imposed earlier are the tariffs on steel and aluminum. So a lot of companies that use steel for their production - everything from this maker of kegs to makers of heavy equipment like Caterpillar - they have to pay more for the steel they bring in or the steel that they buy. And that's having an effect on their bottom line. Now, for the most part, consumers have been pretty protected from the tariffs. But this last round of tariffs on $200 billion worth of Chinese goods - that's going to impact all kinds of consumer goods.

MARTIN: So is there any sense - given everything you just told us, is there any sense of what we should be looking at as this story continues to develop?

BERLINER: To some extent, the playing field has been cleared. The - you know, the U.S. and Canada and Mexico renegotiated a trade agreement. The tensions with the EU have calmed down somewhat. But really, now this is completely about the U.S. and China. And does this become an all-out war that lasts for years over that really these two countries become sort of fierce rivals, if not enemies, in the world of the - economics or whether these two countries see that there's some benefit in ratcheting back the tension because they'll both be harmed by that. This is the thing to watch for right now.

MARTIN: That's NPR's Uri Berliner.

Uri, thanks so much.

BERLINER: You're welcome. Transcript provided by NPR, Copyright NPR.