A Reuters 'Big View' podcast interview of Mike Musheinesh, CEO of Detroit Axle, whose father, a Palestinian refugee from Syria, founded the company a few years after arriving in the United States. in 1990, is as clear-eyed a comment as they come
Stocking thousands of individual car parts, such as replacement brake rotors and steering gears, essentially from China, Detroit Axle is a distributor to auto repair mechanic shops, brick-and-mortar shops for individual do-it-yourselfers and e-commerce, growing to a thousand employees and over $450 million in sales
In the words of Mr. Musheinesh, the blow-by-blow tariff wars took a double toll on business, by creating great uncertainty with the wild tariff rate fluctuations and by the huge tariff fees which are like 'taxes' paid by the firm
The worst did not come to pass and the company did not have to downsize drastically, as Mr. Musheinesh planned in anticipation
The tariffs did not create a flourishing domestic manufacturing resurgence which, if ever this were to occur, would require infrastructure and expertise - neither of which exists today
The tariffs did shake up the business segment of Detroit Axle, compelling many of its competitors to close down, presumably because debt leverage weakened their ability to resist
By reinvesting profits in the business over decades, the Musheinesh, father and son, were just better prepared to the headwinds
To stay in business, the firm took on part of the tariffs and profits fell by ...80%
Benefiting from woes of direct competition, turnover actually increased...by 35%
Ever measured in his comments, Mr. Musheinesh has more to say about tariff uncertainty, distortion of market conditions and toll on future investments
In the words of Mr. Musheinesh
Tariff uncertainty
"The first Trump administration put a 25% tariff, and he came and continued his policies, and now went up to 72.5% before it dropped by 10% to 62.5%. I mean, to put it in context for your viewers, I mean, a million dollars’ worth of products I imported, once upon a time we paid the government $25,000 in tariffs, taxes. And now for the same million dollars in product, we paid the government $725,000 in tariffs, or taxes, whatever you want to call it. And now we dropped to $625,000. So it’s earth-shattering"
"We run on small margins, everyone runs on a small margin, you know, what is it, 5, 6, 7%, depending on which product line we’re selling. But to be levied these kinds of huge tariffs, had to change the whole way we operated"
Distortion of market conditions
"The government is choosing who the winners and losers are. That should be the market. You impose tariffs, now what happens? You know, there’s a lot of money to be made by avoiding tariffs. You know, as prohibition in the ’30s came around, or the ’20s, and no one’s allowed to drink booze...."
"So criminality might be rising up. Because we see people selling similar products for half the cost, right. We know, you know, that they’re probably skidding the tariffs by going through other countries or whatnot. So anyways, there is no more level playing field anymore, now you’re competing with, you know, bad actors, you’re competing with people that might have been tariff-exempt, that are, you know, favorable to the government here"
Toll on future investments
"There’ve been many people that could not hang on. I mean, again, this is a market right now of who can survive. It’s not a market of who can thrive. I mean, they came and they took $250 billion out of the economy from tariffs. This $250 billion should have been multiplied fivefold in economic activity, creating more taxable revenue. But on the other hand, none of that happened"
"My father and I take everything we worked for and we put it into the company. We put more than just skin in the game, year after year after year, so here we’re going from, 2014, $13 million in tariffs paid to the federal government, to over $110 million in tariffs paid to the government. So that money was all for merchandise and machinery and engineers and pallet racking and equipment, but that’s all gone. And it’s given to the federal government. Maybe they paid interest on their debt. so I don’t know how that helps to generate economic activity, paying interest"
The transcript of the full interview of Mr. Musheinesh is published on Reuters
[After the Supreme Court's decision to strike down most of President Trump's sweeping tariffs on February 20, Mike Musheinesh, CEO of auto parts company Detroit Axle, said
"It's a sigh of relief, not only for myself but for the American consumer, for the American businesses"
According to Mr. Musheinesh, the Supreme Court's decision could result in millions of dollars returning to his Michigan-based business, and a win for all consumers who were paying higher prices because of these tariffs
Mr Musheinesh added that the ruling also opens the door for his company's separate lawsuit against the Trump administration to move forward.
"So everyone knows our legal system still works, and our constitution still takes the precedent over any sitting president"]