US Chamber calls for end to shutdown as businesses struggle

The US Chamber of Commerce had a message for Congress on Tuesday: End the shutdown."The shutdown is h...

Posted: Jan 9, 2019 6:44 AM
Updated: Jan 9, 2019 6:44 AM

The US Chamber of Commerce had a message for Congress on Tuesday: End the shutdown.

"The shutdown is harming the American people, the business community, and the economy," Chamber executive vice president Neil Bradley wrote in a letter to Congress. "The adverse consequences of the shutdown are wide and growing."

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The closure of key government agencies comes as American business owners are struggling to deal with the fallout of President Donald Trump's trade wars, as well as increased market volatility and growing economic uncertainty.

Trump has said the shutdown could last for months -- or years -- and while it most immediately affects government workers and federal contractors who aren't getting paid, it has created severe challenges for businesses that depend on government data, licensing or other functions.

Farmers, for example, would normally be looking to a monthly report on the supply and demand of agricultural products around the world to help determine what to plant next season. But the next report won't come out as scheduled on January 11 if the US Department of Agriculture remains unfunded.

Businesses that rely on monthly export and import data missed an update Tuesday because the Commerce Department isn't fully operating either. And US businesses that import steel and aluminum and are seeking an exclusion from Trump's tariffs may have to wait longer to hear if their application has been approved, because those applications are also handled by the Commerce Department.

The shutdown also poses challenges for industries that need approval from the federal agencies temporarily shuttered. Pending company mergers, for example, are being slowed because the Securities and Exchange Commission isn't fully staffed.

Breweries trying out new craft beers are stuck, too, because the Alcohol and Tobacco Tax and Trade Bureau, which must sign off on all new labels and packaging, has been shut down.

The list of nuisances goes on. The Internal Revenue Service isn't staffed to take questions from employers that must send out W-2s to workers by the end of January, or businesses who have questions about changes under the new tax law.

Employers will also have to wait until the shutdown is over to use the online E-Verify system to confirm whether applicants have a legal right to work in the United States. It doesn't prevent someone from starting to work, but prolongs the on-boarding process -- and opens up the risk that companies may have to let go of employees who don't later pass the check, even if they've already started working.

Trump's efforts to overhaul the global trading system has already strained some business owners and farmers. He's said that he wants foreign countries to change their practices and treat Americans fairly, but despite what the President has often suggested, it's not China that's paying for the tariffs but US importers. The duties have raised the price of goods ranging from foreign steel and aluminum to Chinese-made semiconductors and luggage for American companies.

Some businesses, like Missouri-based Cap America, have had to start paying a 10% tariff on a majority of their inventory because it comes from China. The company made most of their baseball caps in-house (and was appropriately named) until 2001, but it became cheaper to buy them from China. Now, about 89% of the caps sold in the United States comes from China. Cap America then embroiders them here.

In December, the company had to set prices for 2019 without knowing if there would be a 10% or 25% tariff on their imports. Trump had threatened to raise the tariff rate to 25% on January 1, but put off the hike while he and Chinese President Xi Jinping agreed to a 90-day truce that ends in March.

Phil Page, chairman and CEO of Cap America, said he doesn't expect to know how his price increase will affect demand until the end of the first quarter.

"It's the uncertainty that causes the most stress in this situation," he said.

Retaliatory tariffs imposed by other countries have closed off some markets to American farmers. China stopped buying American soybeans for about six months, though purchases restarted in December. Mexico put tariffs on American pork and Canada imposed duties on beef.

A new trade deal struck between the United States, Mexico and Canada to replace the North American Free Trade Agreement has offered some reassurance to farmers that markets to the North and South would remain open to trade.

But even though Trump and his counterparts signed the deal in December, it must still be approved by Congress where leaders from the Democratically controlled House have voiced concerns about its labor and environmental provisions.

Lawmakers are expected to wait for an economic impact study before taking a vote, but it's unlike that will come before mid-March. It's being done by the US International Trade Commission, which has suspended investigative activities during the shutdown. Plus, Trump has threatened to withdraw from the original deal in the meantime, which could invite more tariffs on US goods and risk an economic shock.

Despite the new trade deal, the retaliatory tariffs will remain in place while Trump keeps duties on foreign steel and aluminum. Many businesses and farmers have urged the administration to lift those taxes.

In the interim, the US Department of Agriculture has offered some financial aid to farmers hurt by the tariffs -- but it's not processing new applications during the shutdown. The agency said Tuesday that it would extend the application deadline by the number of days the government remains shut down, but won't pay out money until Congress votes to reopen.

"Uncertainty is a problem," said Brian Duncan, who grows corn and soybeans and raises hogs in Illinois. "We deal with enough uncertainty, the weather, the wind, snow, you name it. When you add more layers of uncertainty, it makes business more difficult."

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