Why These Companies in Louisville, Ky., Fear Trump’s Tariffs

The people running CRG Automation are not openly rooting for global economic chaos, but they concede that they are in a perfect position to profit from it.The more that international trade is challenged by uncertainty — like President Trump’s threatened tariffs, or conflicts and crises that impede shipping — the greater the pressure on companies to move factory production to American shores.But making goods in the United States means confronting higher wages and shortages of skilled workers. Which is where CRG Automation comes in.At its plant in Louisville, Ky., engineers design and build systems that allow robots to take over repetitive tasks from human workers. The company promotes its offerings as crucial elements in the mission to expand American factory production. It expects sales to double this year.“We’re in an industry that is uniquely positioned to capture the benefits of global turmoil,” said James DeSmet, CRG Automation’s chief executive. “We benefit when America wakes up and says, ‘We have to manufacture here.’”Yet even CRG Automation finds itself pressured by the trade war that Mr. Trump is vowing to unleash.Its plant depends on foreign suppliers for about 25 percent of its parts and raw materials: robotics from Japan, electronic controllers from China, basic machinery from Mexico. Threatened tariffs on Mexico and Canada were suspended on Monday, a day before they were to take effect. But duties on China were imposed as scheduled on Tuesday and drew immediate retaliation by China, a worrying sign that trade tensions could escalate further. That leaves CRG Automation facing the likelihood of higher prices.“Our costs would rise substantially for components where we don’t have a good option to either replace it domestically or from a country that’s not being subjected to tariffs,” said Paul Lauritzen, the company’s chief operating officer.Louisville, which has a metropolitan area of 1.3 million, is poised to advance with a renewed focus on domestic industry. But a mixture of opportunities and concerns animating the region’s commercial life highlights the potentially volatile effects of tariffs in an age of global supply chains.Mr. Trump celebrates protective duties on imports as a way to force companies to abandon low-wage centers of manufacturing like China. Yet the consequences of tariffs could threaten jobs that are already here.The Zoeller Pump Company has been in business for 86 years, remaining in Louisville even as competing manufacturers shifted production overseas. Its chief executive, Bill Zoeller, whose great-grandfather founded the company, embraces the “Made in America” label as both an ethos and a marketing advantage.The company’s pumps go into homes, apartment blocks and commercial structures. When its supplier of motors, General Electric, moved to Mexico two decades ago, the company bought a domestic manufacturer to preserve its identity as an American concern.The company’s newest employees start at $24 an hour, Mr. Zoeller said. It manages to pay such relatively high wages by focusing on high-quality products that it can sell for a premium.Zoeller has also invested in automation. On its factory floor, five swing-arm robots oversee work previously handled by a dozen people. They pivot swiftly and lunge toward surrounding machinery, picking up metal parts and inspecting them for imperfections.The robots are not there to replace people, factory managers said, but rather to liberate workers from tedious and grueling tasks, freeing them for jobs that require dexterity and judgment. Over the last six years, Zoeller’s work force has grown to more than 300 from 220.But now Zoeller is also in the cross-hairs of the unfolding trade war.The company relies on its own factory in Canada to make control panels for its largest pump systems. The 25 percent tariffs on imports that Mr. Trump threatened on products from Canada, before a reprieve on Monday, confronted Zoeller with a major operational challenge.“If we’re the bad guys on this,” Mr. Zoeller said, “then everybody’s the bad guys.”Louisville is famous as a leading center of bourbon — whiskey made predominantly from corn. Distilleries and tasting houses occupy red brick buildings downtown, exporting their wares around the world. These days, fear intrudes on the festivities: American spirits have traditionally been targeted for retaliatory tariffs.Seven years ago, when the first Trump administration imposed 25 percent tariffs on imported steel, the European Union responded with duties on American whiskey. The result for local distillers was $600 million in lost sales from 2018 to 2021, according to the Kentucky Distillers Association.The whiskey tariffs were suspended in 2022, when the Biden administration forged a deal with the European Union. But they are slated to return at the end of March unless the Trump administration strikes a new deal.Mr. Trump said Friday that he planned to increase tariffs on European imports, including steel. That could intensify the threat to local exporters, said Sarah Davasher-Wisdom, chief executive of Greater Louisville, a regional chamber of commerce.“The goal is to increase domestic production,” Ms. Davasher-Wisdom said. “But this inhibits our global companies’ ability to sell their products abroad.”For CRG Automation, uncertainty about the terms of global trade has propelled its growth.Years of upheaval have compelled companies to move factory production closer to customers in the United States. Business leaders fret about conflicts and environmental crises that have threatened shipping access through the Suez and Panama Canals. They nurse memories of the disruptive forces of the pandemic.Some have shifted production to Mexico from China to avoid American tariffs and volatile shipping costs. But Mr. Trump’s threats to impose tariffs on Mexico have heightened risk, while adding momentum to the movement to bring work back to the United States. Labor strife at railroads and ports has exposed the risks of relying on faraway factories to make parts.“All that has to happen is the longshoremen go on strike and you are freaking hosed,” said Jim Lancaster, chief executive of Lantech, whose family-owned business in Louisville makes equipment that wraps pallets loaded with retail goods with plastic wrap — a means of limiting damage during transit. “When you think of all the points, all the things that have to work in a system to get something from Shanghai to here, it’s risk. And risk has cost.”Lantech has resisted the lure of lower-cost countries, intent on remaining in Kentucky. Yet Mr. Lancaster has struggled to find enough people willing and able to work in his factory. This he blames on inadequate public education, social strife like drug addiction and an increasingly transient mind-set enhanced by the disruptions of the pandemic. He has hired CRG Automation to supplement his plant with robotics.“The advantage of automation is it shows up for work every day,” he said. “Automation doesn’t mind working two shifts.”The CRG Automation factory feels something like a workplace for people who never outgrew their toy trains and erector sets. Robotic arms lie arrayed across the concrete floor, awaiting assembly, alongside custom-shaped slabs of steel and electronic components.“It’s an engineer’s dream,” said Mr. DeSmet, the chief executive.On a recent afternoon, the company was assisting a business in Indiana that makes weights that stop helium balloons from floating away. The customer had an order from a party supply distributor for a million units a month but did not have enough workers on hand. Retaining staff was a perpetual challenge: The work was monotonous and devoid of creativity. So the factory was testing a system that used robots to tie lengths of ribbon to the weights.On another section of the floor, engineers were deploying robots to move heavy steel pipes, work that is now handled by teams of people.The company seeks to simplify its systems so that even temporary workers can be quickly trained to run them.In recent weeks, customers have been grappling with a new source of concern — confusion over the rules governing trade.As Mr. Trump floated proposed terms for tariffs on major trading partners, companies that depend on imported parts and materials worried about the basic economics of their businesses.Worry complicates planning. And that discourages investment.“Tariffs have a lot of political whipsawing associated with them,” said Mr. Lauritzen, CRG Automation’s chief operating officer. “It’s much harder to predict a longer-term strategy.”