The global trade war makes a local stop: Springfield
The Trump administration’s global trade war with China has hit home in Springfield — and for riders on the MBTA.
The US Trade Representative recently refused to lift 25 percent tariffs on imported components for some 400 new Orange and Red Line subway cars being assembled at a Chinese company’s massive factory in Springfield, part of an $843 million contract with the Massachusetts Bay Transportation Authority.
The tariffs could affect the company’s future in Springfield and add tens of millions of dollars to the costs of finishing the MBTA cars. But the agency said the company, CRRC, and not transit riders or taxpayers, will have to absorb that blow.
“CRRC MA is responsible for any cost implications associated with changes in tariffs,” MBTA spokesman Joe Pesaturo said.
CRRC declined to comment on Friday.
Backed by the Chinese government, CRRC opened its 200,000-square-foot Springfield factory in 2017 as part of its agreement with the MBTA. It had about 120 workers at the end of 2018, and predicts employment to top 300 by 2020.
A portion of the subway cars are built in China, and CRRC then finishes and assembles them in Springfield. The company has said at least 60 percent of the finished cars will be sourced from US suppliers, and the rest imported from China — including the steel car shells.
Hundreds of companies have sought relief from the tariffs after President Trump imposed them last year. An examination of applications for exemptions on steel tariffs by the Associated Press, for example, found the administration has so far approved nearly 14,000 requests, and rejected 4,400. Thousands of additional requests are awaiting decisions.
At its Massachusetts plant, CRRC filed for 16 exemptions from the 25 percent levy on the car shells, air ducts, ceiling panels, and other Chinese parts.
In its applications, CRRC warned the tariffs “will result in increasing costs to all parties involved, which in turn will ultimately either be borne by the public or, alternatively, result in less value being utilized from limited federal and state funds.”
The US Trade Office denied CRRC’s request in a letter to the company earlier this month, saying the exemptions would “undermine the objective” of the tariff program. The trade representative’s office did not respond to a request for comment Friday.
The Springfield factory’s first new Orange Line cars are expected to enter service this year, a long-awaited transit improvement that will lead to more frequent service on the overcrowded subway line.
The MBTA contract has also served as a springboard for CRRC to secure more work in the United States. The company now has contracts to build cars for the Los Angeles and Philadelphia transit systems at the Springfield factory.
But now, some of the company’s Western Massachusetts boosters worry the tariffs will end up costing manufacturing jobs in the United States.
“President Trump is trying to invoke the tariffs as a way to support American manufacturing,” said state Senator Eric Lesser, a Democrat from Longmeadow whose district includes Springfield. “This is an example of American manufacturing jobs potentially being ended as a result of the tariffs. It’s the opposite of how he intends.”
John Scavotto, business manager for the Sheet Metal Workers Local 63, which represents about 35 workers at the factory, worried that the tariffs would prevent CRRC from bidding on new contracts; the company was far and away the low bidder on the MBTA order, besting bidders from Japan, South Korea, and Canada.
“I could almost see [reason for the tariffs] if there was a company in this country that built rail cars. But there isn’t,” Scavotto said. “They’re putting Springfield residents to work here, and you’re going to squash something that was desperately needed in this area?”
CRRC’s biggest critic in Massachusetts, state Representative Sean Dooley, doubts the tariffs would stop the company from bidding on other contracts.
The increased costs to CRRC would still be worthwhile if it meant getting more of a grip on the US market, said Dooley, a Republican from Norfolk who has raised concerns that the Chinese government will use the new railcars to surreptitiously spy on Americans or disrupt US transportation.
“Since it’s owned by the Chinese government, and they want to be in this space, they can just eat the tariff,” he said. “They’re not trying to run a business like we think of running a business.”
Relief could still come if US and Chinese negotiators can reach an agreement on a new trade deal. In a brief and ambiguous update on trade discussions with China, Trump on Friday said he sees tariffs largely as a negotiating tool.
“It’s going extremely well,” Trump said at a news conference. “Who knows what that means? Because it only matters if we get it done.”