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How An American Company Is Grappling With The Potential Impact Of A Trade War


We're going to hear now from one company whose costs are rising because of this trade war. Indiana-based Cummins makes things like engines and generators. It relies on lots of other companies to supply components for its products, and then it sells those products around the world. The company's vice president, Tony Satterthwaite, put the company's quandary this way.

TONY SATTERTHWAITE: Should we raise prices and risk losing those customers to other competitors who may not be facing these tariff increases? Or do we eat those tariff costs in our business and reduce our profitability? This is a dilemma I think all of us in the business world are facing right now regarding these tariffs.

CORNISH: Satterthwaite worries that they may have to raise prices. And that could make customers go elsewhere.

SATTERTHWAITE: We will be showing up at their door in the near future with a price increase related to the tariff. And that will have impacts as to whether or not that customer will possibly say, I'm not willing to pay that; I want to go to a different supplier. And that different supplier may be an American company, or it may not. It may be a European company who is not facing these same tariffs or a Japanese company. And I think that's some of the unintended consequences that are going to happen as a result of these tariffs.

CORNISH: White House trade adviser Peter Navarro says that, quote, "our view is that these actions are necessary to defend this country and that they are ultimately bullish for corporate America, for working men and women of America and for the global trading system." Do you see them as necessary to defend the country?

SATTERTHWAITE: We completely agree with the objectives the administration has stated regarding our desire to compete on a more level playing field everywhere in the world and particularly in China. We do not agree, however, that these unilateral tariffs that affect mostly consumers in the U.S. are the right way to go about this.

CORNISH: You use the word unilateral. And currently the White House can act unilaterally on trade sanctions. And I want to ask you about something else. Billionaire businessmen Charles and David Koch are putting their efforts behind a bill that would give Congress more of a say on any new tariffs. They would put some limits on what the president could do on his own. Would you support something like that?

SATTERTHWAITE: I think the more people we can get engaged in the discussion, the more other countries we can engage, the broader the dialogue within the U.S. - I think those are all good things. I think too much unilateralism in this case is - does not lead to solutions that will last. We have spoken with our representatives in Congress. I personally was in Washington, D.C., yesterday and visited with a number of representatives, a number of embassies and also the Commerce Department to have a conversation on this exact issue.

CORNISH: In the meantime, while you're having these conversations, the EU is getting ready to levy a whole bunch more tariffs on U.S. products. Do you feel like this situation is escalating in a way that worries you?

SATTERTHWAITE: I think there was never a doubt that when the trade war started it would escalate. It is escalating. And I think that was a very predictable surprise, if you want to call it that, based on what was happening here. I think this - you know, the general view is this is how trade wars go. And it's going pretty much to the book. And that is people escalate. People respond. The escalations rise. And that's one of the reasons we believe this will not ultimately be successful.

CORNISH: At the end of the day, given that we have a former CEO - right? - as a president, did you expect to be in this position?

SATTERTHWAITE: Did we expect to be in this position? I don't know if I could have said so. The rhetoric of the president when he was running for office on this issue was fairly strong. And so I am not surprised. I think, you know, our president is a former CEO. He's also an excellent deal negotiator. And I just sometimes wonder, what's negotiation, and what's the deal? And I don't know if this is policy or if this is an attempt to negotiate something. And we just don't know, which in many ways makes it harder for businesses to figure out how to react.

CORNISH: Tony Satterthwaite - he's vice president of Cummins in Indiana. Thanks so much.

SATTERTHWAITE: Thank you, Audie Cornish. I appreciate the opportunity.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.