Hung out to dry twice, Tennessee city stumped by Trump's washer tariffs

[January 29, 2018]  By David Lawder

CLARKSVILLE, Tenn. (Reuters) - When President Donald Trump's imposed steep tariffs on imported washing machines last week it was a "Not Again" moment for officials in this north Tennessee city that has lost jobs to an international trade dispute before.

The move threatens to stunt the launch of a new LG Electronics <066570.KS> washing machine factory under construction in Clarksville, just four years after the U.S.-China trade fight over solar panels scuttled a nearby $1.2 billion Hemlock Semiconductor polysilicon plant.

"It's like déjà vu for Clarksville, to say 'how can this be happening twice to us,'" the city's mayor, Kim McMillan, told Reuters.

She said that the city government was scrambling to help the South Korean manufacturer accelerate its production launch by ensuring that utilities and infrastructure are quickly put in place at the factory site and expediting approvals.

"We've got to do whatever we can to make sure that LG is able to still open their facility and hire people," McMillan added. "We don't want to see a repeat of what happened with Hemlock where they can't open the plant."

At stake is an appliance manufacturing complex that could eventually employ thousands of workers and which the state of Tennessee and the local community supported with some $23 million in grants. The 310-acre (1.25 square kilometer) site an hour north of Nashville has room for three additional buildings identical to the plant's $250 million, 600-job first phase.

Trump's decision to impose 20 percent to 50 percent tariffs on washer imports and parts has local officials asking what his "America First" stands for: supporting all U.S. manufacturing jobs or just favoring traditional American brands over foreign rivals. Labor statistics show that foreign companies have been the source of the majority of new manufacturing jobs since the 2009 recession.

LG told U.S. retailers on Wednesday it would raise prices in response to the tariffs. That could dent its market share, reducing initial output and employment, said company spokesman John Taylor.

"If you lose floor space at retail, it can take years to get it back," Taylor said.

Construction crews were working 24 hours a day on the site last week, still only a partial steel skeleton, after LG said earlier this month it would bring forward its production launch a second time again to the fourth quarter of 2018.

LG's rival Samsung Electronics <005930.KS>, whose imported washers also will be hit by the tariffs, has more breathing room. It has already started production at a $380-million washer plant in Newberry, South Carolina, in a former Caterpillar Inc <CAT.N> generator set factory.

The washer tariffs are the culmination of a decade-long campaign by Whirlpool Inc <WHR.N> against what it saw as unfair pricing and "country hopping" by LG and Samsung to avoid anti-dumping duties.

HEMLOCK FLASHBACKS

The tariffs on washers and solar panels triggered memories of a 2014 U.S.-China trade spat over solar panels, which made Hemlock abandon its just-completed Clarksville plant at a loss of 500 initial jobs and dashing hopes for more to come.

Workers are seen during the construction of the LG Electronics washing machine plant in Clarksville, Tennessee, U.S. January 18, 2018. Picture taken January 18, 2018. REUTERS/David Lawder

Hemlock's main market for polysilicon, a core ingredient in solar cells, dried up after Beijing responded to U.S. anti-dumping duties on Chinese solar panels with duties on U.S. polysilicon.

While beyond its control, the Hemlock pullout has affected the region's efforts to attract other firms, said Jim Durrett, mayor of Montgomery County, which has its seat in Clarksville.

The closure "kind of gave our community a black eye from a recruitment standpoint," Durrett said.

With the help of competitive state and local grants and tax incentives, low living costs and a steady supply of well-trained workers retiring from a nearby U.S. Army base, this city of about 150,000 managed to regain some traction.

A year after Hemlock left and razed its plant to protect its technology, Google <GOOGL.O> acquired it for a data center, though the tech giant has only committed to 70 jobs and has yet to detail its plans.

Hankook Tire <161390.KS>, whose decision to build its first U.S. factory in Clarksville pre-dated the Hemlock closure, opened the 1,000-worker plant last year.

Landing the LG washer plant was seen as marking a full jobs recovery from the Hemlock debacle, said Michael Evans, the county's economic development director.

FOREIGN COMPANIES, LOCAL JOBS

With local industrial parks filled with foreign names that have arrived with the rise of the mid-South's manufacturing base, local officials and residents interviewed by Reuters saw no distinction between foreign-owned and American-owned firms.

"Once they're here and once they've embarked on the investment, those are local jobs. LG's a continuation of that," said Jeff Robinson, owner of the Blackhorse Pub and Brewery in Clarksville.

And in a region where support for Trump runs deep, they are wondering why he would use tariffs to favor Whirlpool and GE Appliances, now owned by China's Haier Electronics Group <1165.HK>, over a competitor moving production to Tennessee.

"I think it goes against what (Trump) has talked about doing and that’s bringing jobs back to America," said Durrett, the county mayor and a Republican.

(Reporting by David Lawder; Editing by Tomasz Janowski)

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