As Elkhart, Ind., Goes, So Goes the Nation, and Elkhart Is Nervous

ELKHART, Ind. — The tables were filled at the Chubby Trout restaurant and the local craft beer flowed. The Flippin’ Cow was packed too, with diners overlooking Simonton Lake. Small manufacturing companies were advertising for workers, offering health insurance and retirement accounts.

But Elkhart, with about 55,000 residents and a 2.3 percent unemployment rate, is also a bit nervous.

This city near the Michigan border has long been used as a political prop — first by President Barack Obama, then by President Donald Trump — to express concern for the downtrodden and to make a claim on newfound prosperity.

Now, Elkhart may be sending a message that no politician wants to hear.

The city calls itself the “RV Capital of the World” — more than 80 percent of the vehicles sold in the United States are made in Elkhart and the surrounding area, according to the RV Industry Association — and Trump’s tariffs on imported steel and aluminum are increasing costs, diminishing demand and causing concern that a 10-year boom cycle could be waning.

Shipments of motor homes were down 18.7 percent in June compared with a year ago, and shipments of smaller trailers and campers were down 10.5 percent, according to the RV Industry Association. Motor home shipments were down 6.5 percent in July, but overall shipments were up 10 percent compared with the same month last year. Some companies have cut back to four-day work weeks. Amid strong job gains nationally, hints of rising wages and solid overall economic growth, Elkhart’s health is decidedly ambiguous.

“I think it’s a yellow light,” said Richard Curtin, a University of Michigan economist who is a consultant to the RV industry. “Depending on how things evolve in six months, it could be a red light, getting to the end of the expansion.”

It could also be temporary if, as some in the industry think, the problem is related to excess inventory, he said. Still, the health of the industry, which has a track record as an economic bellwether, bears watching. “RVs have always preceded the rest of the economy in a downturn and in an upturn,” Curtin said.

Frank Hugelmeyer, the RV association’s president, declined to comment.

The effect of the president’s tariffs on everything from steel to soybeans is playing out against the backdrop of the midterm elections, with some Republicans trying to make a robust economy central to their case for maintaining control of Congress. In Indiana, Missouri, North Dakota and other states, the president’s policies are starting to be felt, especially in industries that have large trading relationships with China.

“I think there’s serious concern about the effects of tariffs on the RV industry,” said Sen. Joe Donnelly, D-Ind., one of the Senate’s most vulnerable incumbents this year. His home is nearby. “So many of the components that go into RVs are directly affected by these tariffs.”

“It is something that we watch very, very closely having gone through the other side of this when unemployment was 22 percent,” Donnelly said, referring to the unemployment rate in Elkhart at the peak of the Great Recession.

In Elkhart, a field of RVs is as common as corn. An RV Hall of Fame lionizes the industry and its progress from small aluminum trailers to luxury vehicles with the amenities of expensive condominiums. “We like to say we build fun in Elkhart County,” said Mike Yoder, a Republican and an Elkhart County commissioner.

But Yoder is among those who think the fun could be ebbing. “Everybody in the industry is aware of the negative significance of that,” he said of the tariffs. “We are experiencing a bit of a slowdown in RV production, and a number of companies are working four days instead of five to clean up inventory.”

“My personal opinion is this is horrific for the community,” he continued. “This is a really big deal for us. We export a lot of product and import a lot of product. If this whole trade dispute expands much more, it has serious implications, and we will once again lead the country into a recession, without a doubt.”

Donnelly said that he had objected to China’s dumping of steel into the United States, but that the issue should have been resolved by the administration without a broader trade war. The tariffs, he said, had caused uncertainty and “extraordinary upheaval.”

In Elkhart, the cycles of the economy are well known. Obama came here for his first domestic trip as president, when the region’s unemployment rate was the highest in the nation. Since then, it has enjoyed an extended period of prosperity. Its economy has been remarkably adaptive. Once the home to Alka-Seltzer and other over-the-counter remedies, it pivoted to heavier manufacturing as the RV industry took off.

Now the fretting has returned.

“I think a good term is ‘concern,'” said Mark Babson, chairman of Elkhart’s economic development department. “Nobody’s in a panic; they are just concerned.”

Nick Kieffer, chief executive and president of the Goshen Chamber of Commerce, agreed. “It’s the uncertainty as well, not knowing where the playing field is going to be,” he said.

The RV industry is forecasting sales of about 500,000 vehicles this year, about the same as in 2017 after several years of strong, sometimes double-digit, growth. The tariffs are adding as much as 50 percent to the price of some materials, and the companies in turn are raising prices.

“Are they having an effect?” said Dave Schutz, an executive at Dometic, a large parts supplier. “In the long term that remains to be seen. It depends on how deep and how much farther they go.” “The first sign of us as an industry is usually the 4th of July shutdown,” Shutz said, referring to local manufacturers. “Last year, we shut down one week. This year, we saw quite a few shut down two weeks.”

Still, Trump has many defenders in Elkhart, where he won by more than 30 percentage points in 2016. Among them is Dan Holtz, who owns Troyer Products, a small manufacturing company that makes accessories for recreational vehicles.

He is also the county Republican chairman and was onstage with Trump when the president spoke here to an enthusiastic crowd of more than 6,000 people in May. “It was hard for him to not get a warm welcome here,” Holtz said. “It’s just the zeitgeist of the community.”

“I almost welcome a slowdown,” Holtz said in a small conference room at his company. “I can’t find enough workers.”

Indeed, companies like his have had to raise pay and increase benefits to attract and retain workers. He said that the drop in shipments is likely an “expected correction” in the market.

Blaming the drop-off on tariffs, he said, was “myopically political.” He believes Trump is using the tariffs as a negotiating tactic.

Yoder said that was far too charitable. “My perspective is our folks in Washington are not being honest,” Yoder said. “There is no plan. This is a very dangerous way to negotiate a trade deal. Folks like people in Elkhart are going to suffer.”