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President Trump's trade war threatens US newspaper industry

Employees inspect printed newspapers as they come off the press at Paddock Publications. MUST CREDIT: Photo by David Kasnic for The Washington Post.1 / 5
Large stacks of paper at Paddock Publications in Schaumburg, Ill., which prints Sauk Valley Newspapers. MUST CREDIT: Photo by David Kasnic for The Washington Post.2 / 5
Sauk Valley reporter Gavin Jensen and photographer Alex Paschal on assignment in Dixon resident Dan Gascoigne's garage. The two worked on a story about Gascoigne's wood working business, where he makes toys and barrels that are given to children being treated for cancer. MUST CREDIT: Photo by David Kasnic for The Washington Post.3 / 5
The Dixon Telegraph, which started up more than a century and a half ago, reports on the doings in town. MUST CREDIT: Photo by David Kasnic for The Washington Post.4 / 5
Sauk Valley Newspapers editor Jeff Rogers publishes two newspapers out of one newsroom in rural Illinois. MUST CREDIT: Photo by David Kasnic for The Washington Post.5 / 5

STERLING, Ill. - As a longtime editor of small-town newspapers, Jeff Rogers has seen his industry face the collapse of print advertising, the rise of the internet and more. Today, his 18 employees work in a newsroom here that puts out two daily newspapers for towns just 16 minutes apart, the Daily Gazette in Sterling and the Dixon Telegraph, which started up more than a century and a half ago.

Each publishes a few stories a day on its website and Facebook page - a sign of the times - but still tries to preserve a local print readership, putting its full reports in the newspapers that are available by home delivery and in the metal boxes dotting the local downtowns.

The newspapers, like the staff, are leaner than they were a decade ago, with fewer reporters to write about crime, the school board and youth sports and to craft obituaries for their aging readership.

And now they're facing a new and unexpected threat: President Donald Trump's confrontational trade policies.

Last year, in one of the Trump administration's first actions on trade, the U.S. government imposed tariffs on Canadian lumber. A few months later, it added tariffs on Canadian uncoated groundwood paper.

The result has been a jump in the cost of newsprint, the second-biggest operating expense after salaries for most newspapers. Rogers and fellow news executives across the country are now bracing for price increases that could exceed 30 percent, forcing tough budget decisions and potentially driving some community papers out of business.

"This may be the thing that pushes us across the line," Rogers said. "We're all kind of close to that edge."

Shaw Media, one of the oldest family-owned newspaper companies in America and the publisher of the Daily Gazette and the Dixon Telegraph, has told some of its more than 150 publications in northern Illinois and Iowa to adhere to strict page counts to reduce costs. The Tampa Bay Times, a regional paper in Florida, is cutting up to 50 jobs because of the soaring paper costs, which affect every newspaper that publishes in America, including large national publications scorned by Trump.

"This is the biggest issue we've faced in a long time, if ever," said Sam Fisher, president of the Illinois Press Association.

The U.S. Department of Commerce imposed the tariffs in response to a complaint from the North Pacific Paper mill in rural Washington state, which said Canadian paper manufacturers were being subsidized by their government and were therefore able to offer lower prices, giving them an unfair advantage over their U.S. counterparts. The U.S. mill, which was bought in 2016 by New York hedge fund One Rock Capital Partners, is one of five left in the United States.

Under U.S. trade law, the government can impose import tariffs after investigations and rulings by the Commerce Department and the International Trade Commission, an independent, bipartisan federal agency. The Commerce Department investigates and determines whether anti-dumping and countervailing have occurred, which did in this case. (Anti-dumping occurs when goods are sold for less than fair market value, and countervailing is when the goods are subsidized by a foreign government.)

The trade commission determines whether U.S. industry is harmed by the imports. Both the Commerce Department and the ITC found in preliminary investigations that imported uncoated groundwood paper was subsidized by the Canadian government and was then being sold below market value in the United States.

The Commerce Department levied its first tariff of 6.5 percent in January and added an additional 22 percent tariff in March. The ITC, which has five bipartisan members selected by previous administrations, is set hold a hearing on the issue July 17 and is expected to release its final determination this summer. Both groups must agree to make the tariffs permanent for them to remain.

The American Forest and Paper Association, like most of the paper and publishing industry, is opposed to the tariffs.

"The uncoated groundwood and newsprint market is a North American market," said Donna Harman, the group's chief executive. "Several U.S. producers operate on both sides of the border, creating manufacturing and market efficiencies through cross-border shipments."

David Richey, a spokesman for NORPAC (the North Pacific Paper Co.), said the mill in Longview, Washington, meets almost half the U.S. demand for newsprint and employs 400 full- and part-time workers. Since the tariffs were imposed, the plant has started up an idled paper machine and brought back 50 full- and part-time employees. The plant is now at full capacity, he said, producing 800,000 tons of paper and packaging annually.

"This is in rural southwest Washington, where companies like NORPAC are critical drivers," he said.

Commerce Secretary Wilbur Ross has characterized the impact on the newspaper industry as minimal, noting at a Senate budget hearing in May that the tariff would result in a one-cent-per-paper daily increase for the Wall Street Journal and a two-cent-per-paper increase for the Daily News in Longview, Washington. "There is an impact, but I think it's useful to have this perspective what it really means," he said.

Kristine Coratti Kelly, a spokeswoman for The Washington Post, said that all publications that use newsprint will be affected but that "it will have a greater impact on the readers of smaller papers."

David Thornberry, publisher of the Longview Daily News, which has a circulation of about 12,000 on weekdays and 15,000 on Sundays, said the tariff increase will be closer to five cents per copy. Even that might not sound like a lot, he said, but it amounts to at least two reporter positions. (The newsroom has 17 employees.)

"The problem is you have over half your expenses wrapped up in two things," he said. "You can't fix this with cutting office supplies."

The paper has written about the tariffs and the jobs that were added back to the plant. It's been a delicate balance, he said.

"This is like hopscotch on landlines for me," Thornberry said. "We're fighting hard to get good employment going, but from a newspaper perspective, this is insane."

Thornberry doesn't blame NORPAC for trying to increase profit. If someone offered to pay him when Americans tune into the BBC, he said he'd be tempted to take the money. But he doesn't buy the argument that this is good for the newsprint industry.

"If they win this thing, it's going to hurt them ultimately," he said. "They can only handle half of the newsprint for the industry. Most of the problems with the newspaper plants have been in supply and demand. No one gets a really great result from a trade war."

The Trump administration has also imposed tariffs on steel and aluminum, levying 25 percent on steel and 10 percent on aluminum, even on its allies of Canada, Mexico and the European Union.

It recently added tariffs on $50 billion in Chinese goods, which Beijing immediately matched, just as Canada retaliated with its own tariffs against the U.S. on products as varied as metal pipe, orange juice and toilet paper.

Commercial press operations that use aluminum plates to print newspapers are hurt by two of those tariffs - on newsprint and aluminum.

Uchechukwu Jarrett, an assistant economics professor at the University of Nebraska-Lincoln, said tariffs almost always affect more than the product being targeted, which is the case with newsprint.

"This is one company that has a problem with their own revenue stream," he said. "If you're having a rational argument, it would be plusses and minuses. If we do this to save one company, what are the losses? We lose a whole bunch of community newspapers."

Nearly half the newspapers surveyed by the Illinois Press Association had reduced their page counts in early May because of the newsprint tariffs. If the tariffs become permanent, 40 percent of the respondents said they expected to reduce staff, and more than half would not fill open positions. Others planned to reduce publishing days or change the size of their format. Some said they would stop printing for civic and community groups, which they do free.

"I have major concerns for the whole industry but especially small community papers in rural America, where papers have a very strong presence in people's everyday lives," said Rick Campbell, a partner in C & R Media, which owns five small newspapers in Southern Illinois.

Campbell said printing costs will rise $20,000 this year because of the tariffs.

"I'm very rural," he said. "I have four community papers under 2,000 circulation. When you talk about those small numbers, that's significant. This increase in cost for me is actually hiring someone, another paid employee."

Jeff Egbert, who publishes the Pinckneyville Press and DuQuoin Weekly in Southern Illinois, said a 30 percent increase in costs will make it difficult for his papers to do the kind of investigative reporting they are known for: exposing a police coverup involving the mayor's son and uncovering a schools superintendent's mishandling of surplus equipment that led to his resignation.

"We're not going to be able to increase our rates and pass it along because our market can't bear it," Egbert said. "So we're either going to have to reduce the number of newspapers we print, increase our subscription rate or we're going to have to look very hard at our employment situation."

Egbert, who describes himself as conservative, like many of his papers' readers, said the president's war on the media makes him question the motives behind the tariffs.

"I'm not sure these newspaper tariffs weren't intended to cut at the core of the newspaper business," he said. "Maybe this wasn't done to hurt us, but it trickles down to me in the Midwest."

A coalition of newspaper publishers, printers and suppliers is lobbying against permanent tariffs, arguing that newspaper demand is down in the United States because readers - and advertisers - have moved from print to the digital space.

"A lot of us view this as an assault at the federal level on us," said Don Bricker, vice president of operations for Shaw Media. "Who we are and what we are as a civic asset has to be considered."

In the Senate, 23 lawmakers from both sides of the aisle have signed on to the Protecting Rational Incentives in Newsprint Trade Act led by Sen. Susan Collins, R-Maine, that would stop the tariffs until Congress and the administration can review their impact. During a May hearing with the Commerce secretary, Collins told Ross that the newsprint tariffs were "harming the industry they were intended to protect."

One of the companies feeling the effect is Paddock Publications, which publishes the Daily Herald, monthly Business Ledger and weekly Reflejos in suburban Chicago and 17 publications in central and southern Illinois. Paddock owns its commercial printing plant and buys paper directly from a Canadian supplier.

Most of the paper rolls arrive by train (eight to 10 rail cars a month) on the Canadian Pacific Railway. A spur ends at Paddock's plant, which does the printing for the papers Paddock owns and for others in the region, including the Daily Gazette in Sterling and the Telegraph in neighboring Dixon.

Don Stamper, production director, said Paddock has a six- to eight-week supply of paper at the plant. The brown rolls, stacked high and stamped with "Made in Canada" in English, French and Spanish, come from Canadian company Resolute Forest Products, which has a plant in Thunder Bay, Ontario, about a 10-hour drive north.

"We've gotten more calls about little newspapers for sale this year than I can ever remember," said Scott Stone, chief executive of the Daily Herald Media Group. "More and more, we're seeing smaller newspapers and people who own them are getting out of the business. There is almost nothing you can do about the digital disruption in our industry. But then to have this push from behind, particularly by the government, is concerning."

Stone said the Daily Herald has reduced pages and combined sections to save money. It also is not filling vacant positions.

"Otherwise we'd be having a normal year where we replace people who left the paper," he said. "In these kinds of circumstances, you really can't. We don't know what is coming next. We have this hearing coming up in July. Are these tariffs going to go into place? Are they going to be more severe? And then what do you do?"

Author Information: by Jackie Spinner.

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