The Kobayashi Maru

June 20, 2018

I’ll openly admit it. I’m a Star Trek nerd. My wife knows it. My children know it. My friends know it. And now you do too.

If you’re not a Star Trek nerd and unfamiliar with the Kobayashi Maru, here’s some Star Trek Universe knowledge. The Kobayashi Maru is a training exercise given to Starfleet Academy cadets in order to test their character when faced with a no-win situation. Only one cadet in the history of the Academy has beaten the no-win scenario. Of course, it was James T. Kirk.

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Some of you probably want to know more about this fascinating fiction, but others want to know the point I’m trying to make. Here it is…are new tariffs creating our industry’s version of a no-win scenario?

Recently the Associated General Contractors of America (AGC) reported that construction costs accelerated again in May, with steep increases for building and road materials, including many that are subject to tariffs which could drive prices even higher. The AGC’s chief economist, Ken Simonson, says, “Prices jumped at double-digit annual rates for metals, lumber and plywood, and diesel fuel, while ready-mixed concrete, asphalt paving, and roofing materials also had unusually large increases. The cost of all goods used in construction rose 8.8% from May 2017 to May 2018, the steepest annual increase in nearly seven years.”   

On May 31, The US imposed steel and aluminum tariffs on imports from Canada, Mexico, and the European Union. The impact isn’t even accounted for in the most recent data.

Simonson adds, “These increases far outstripped the 4.2% rise in the price index for new construction, implying that contractors are facing a severe squeeze on costs for both ongoing and new projects. Moreover, tariffs imposed on steel and aluminum since this data was collected in mid-May are likely to drive contractors’ costs still higher.”

Even before they’ve taken effect, construction officials said the tariffs have triggered a surge of orders that mills say exceeds their current capacity, a situation that threatens to produce construction delays, budget problems, and possibly cancellations for future construction projects.

And what about jobs? That’s what the Association of Equipment Manufacturers (AEM) President Dennis Slater is worried about. He says, “This is not only harmful but inherently unfair to the hardworking men and women of our industry. The American equipment manufacturing worker, the American farmer, and the US economy all lose as a result of the administration’s reckless and never-ending tariffs. Our industry supports 1.3 million jobs and contributes roughly $159 billion a year to the US economy but much of that could go away if this tit-for-tat trade dispute continues. We again call on the Trump administration to deescalate this unnecessary and costly trade war.” Slater was speaking out against the Trump Administration’s new threat to impose another $200 billion in additional tariffs on imports from China. China responded by issuing $50 billion of its own tariffs on U.S. goods, which includes agricultural commodities.

How will we get out of this mess? Is this our very own Kobayashi Maru? A situation in which there are no good answers or solutions? Or is there a Captain Kirk somewhere out there among us?

What are your suggestions? How will the tariffs be affecting you?