Five days before the Army’s 250th birthday festival and parade unfolded in Washington, D.C.,  last month, streets around the National Mall were more frenzied than usual. Dozens of crews were already constructing temporary security fencing and other structures, making routes from Reagan International Airport into downtown sluggish at best. Such was the setting into which over 80 AFS members descended, navigating their way to the association’s annual Government Affairs Fly-In June 10–11, headquartered at the Hotel Washington at 15th and F. 

Representing about 50 different AFS Corporate Member firms from around the country––and to some extent speaking on behalf of hundreds more that were not present––committed industry executives came to both hear and be heard. A rich policy program on Day 1 brought members up to date on economic, trade, energy, and tax issues. On Day 2, the AFS members blanketed the offices of 80 Members of Congress (MOC) representing 21 states. The mission: Explain the vital importance of the metalcasting industry and educate MOCs and their staffs about AFS’s most urgent policy priorities. 

Their messages were personalized but unified as they called for congressional support and leadership to:
(1) Restore Pro-Growth Tax Policy. 
(2) Strengthen Our Nation’s Energy Security. 
(3) Fight Trade Cheats––Support H.R. 1284.
(4) Support the “Leveling the Playing Field Act 2.0.” 
(5) Pass the Protect American Industry and Labor from International Trade Crimes Act 
(6) Rebalance Regulations to Strengthen Manufacturing. 
(7) Modernize America’s Workforce Development System.

Experts Lube the Advocacy Engine  

Fly-In’s cast of Beltway insiders arrived with timely facts and perspective to inform executives’ preparation for the next day’s discussions on the Hill. In addition to five insightful presentations, attendees heard from Economist Stephen Moore who keynoted Tuesday’s lunch and Rep. Rudy Yakym (R-IN)  from the Committee on Ways and Means, who spoke at a breakfast Wednesday as AFS members prepared to launch across House and Senate office buildings advocating for metalcasting’s policy agenda.

Following are modified excerpts from Day 1 speeches that tied business problems to policy solutions. Note: The largest-looming topics of the day––the Tariffs and The Big Beautiful Bill made for a blended backdrop of the AFS meeting. Some presenters’ content was so time-sensitive as to be potentially outdated by the time Modern Casting was published. The editor has minimized references and speculations whose outcomes will likely have been determined by mid-July when this issue has mailed. 

Curtis Dubay
Chief Economist, U.S. Chamber of Commerce
“U.S. Economic and Manufacturing Outlook”

Whatever you believe about the long-term justification of tariffs, they’ve had an enormous cost for the U.S. economy, but we are weathering it. Close to the end of the first quarter, the U.S. economy was on track to grow at 2.5%––tariffs cost us 2.7 percentage points of economic growth … equating to $160 billion of economic growth foregone.

Where’s the underlying strength of the economy coming from? Consumers, and they have continued to spend at a very high rate for a very long time. That spending strength comes from the job market. If you want a job, you can go out and get one, with 226,000 more jobs open than available workers to fill them–– a true historical anomaly. Wage growth, averaging 4% for several years, supports buying power and will keep spending high for a long time. 

There’s one big caveat: inflation. Since inflation took off in March of 2021, prices have risen slightly more than wages in aggregate. However, in the last two-plus years, wages have exceeded inflation, which is why consumers have able to keep spending a very strong clip.

No great revelation: Businesses are short of workers, and we’re going to be short of workers for the rest of our lifetimes. It’s a matter of simple demographics––every generation should be greater in number that the generation before it, like an inverted pyramid, but that’s not what has happened in the U.S. We can’t reverse 200 years of declining fertility overnight, and while immigration would help solve the country’s labor shortage, that’s clearly not going to occur anytime soon, either. 

What about AI? It’s going to help in two ways: (1) Measurable surge in productivity is yet to come, but it is coming. (2) In addition to making white collar work more productive, AI requires enormous investment in physical things, including big data centers filled with all sorts of equipment, as well as new energy infrastructure. In other words, AI will drive demand for construction, technician, and numerous other supporting roles. Bottom line: AI has the potential to boost the economy going forward. Once we’re past the current tumultuous state of tariff affairs, the economy is in a good position for robust growth for the foreseeable future.

There has been some discussion around the rise of stagflation, which was a 1970s phenomenon in which double-digit inflation was paired with low growth. We may be on track for mini stagflation. By the Fed’s own projections, they have the economy growing at 1.7% this year, and so 2% inflation is exceeding the rate of economic growth. This won’t be nearly as painful as the 1970s-style stagflation, but we could be in this situation for about for a year to 18 months.

Todd Snitchler 
President and CEO, Electric Power Supply Association
“Meeting the Energy Moment: How Competitive Power Suppliers Are Responding to a Changing Energy Landscape”

For a high energy-consuming industry such as metalcasting, energy pricing is a universal concern. Restructured states that permit competition in energy generation and transmission enjoy lower prices than states with a traditional monopoly utility model. Wholesale power generators are different––members of the Electric Power Supply Association (EPSA) must compete to be the lowest cost operator in order to be dispatched. According to EIA, from 1996 to 2022, electricity prices for commercial customers rose by 77% in vertically integrated utility markets, but in competitive markets they rose by 43%. And for industrial customers, prices rose by 91% in regulated markets and only 59% in competitive markets. The benefits of competitive markets are real and tangible, and they ultimately affect your bottom line. 

According to an “Energy Tariff Experts” report released from EPSA this spring, rising costs are increasingly due to transmission, distribution, and public policy costs, not generation costs. That’s why engagement at your state capital is vitally important––that’s where these policy decisions are being made, and state policies are first things that hit your bottom line almost without exception. 

Snitchler cited Laurel Peltier, chair of the Maryland Energy Advocates Coalition, Maryland Matters, who said: “Electricity and gas delivery rates are higher mostly due to recent and massive utility spending on profitable capital infrastructure. Utilities leaned on two public policies...that dialed-up the utility financial incentives to overspend.”

States with competitive markets also have better performance. There were 5% fewer outages, and the length of the outages were shorter.

What’s the outlook for generation? Dispatchable resources––those that can be controlled and dispatched–– such as coal, nuclear, natural gas, and hydro will continue to retire, but the administration currently is prioritizing generation as part of its wider strategy of energy dominance and energy security. Ultimately, the administration wants the U.S. to win the AI race, which is a global issue, and China is our leading competitor. 

The president has been very clear that this is something that we can’t afford to lose. We will continue to see a race to how we can deploy more, faster, better to win the global race for AI, because if you lose, you can’t ever come back and get first place again. If you fall behind, you’re behind, and the leader will continue to outpace you. To be the leader, this administration is prioritizing additional energy infrastructure that is required—they will fast-track permitting and streamline regulatory processes, and there is growing bipartisan momentum behind these intents. Democrats like transmission. Republicans like the linear infrastructure of natural gas pipelines. The deal is so obvious. If you have the opportunity to share with members you’re visiting, tell them to just stop making it more difficult than it needs to be.

Elizabeth Lowe 
Partner, International Trade and Logistics Group, Venable
“Navigating Tariffs & U.S. Trade Policy” 

Tariffs in effect, paused and forthcoming tariffs, and open tariff investigations were all explained in detail, as well as foreign retaliatory tariffs. 

Less subject to continuous change is the topic of mitigating tariffs. Most loopholes have been closed, but there are some things companies exporting in the U.S. can potentially look into. A customs review and analysis can assess (1) country of origin, (2) classification, and (3) valuation for products.  

From a country of origin perspective, companies look at whether there is processing done in Canada and Mexico that may qualify for the USMCA exception. Companies can also explore whether certain components or processes occurring overseas could be moved from one country to another in result in a lower tariff jurisdiction, for example getting out of China. Properly shifting the country of origin might help.

Some tariffs are classification based, so importers to the U.S. should make sure their  product is properly classified, which may address some of the tariff application. Chapter 98 is a special tariff provision for products with U.S. inputs in them––the exporter is allowed to subtract the value of those U.S. inputs from the applied tariff when it comes in. 

Customs valuation looks at whether there is––permissible within the regulations––a way to reduce the Declared Value to customs, which is the value on which the tariff is applied. For example, in a multi-tiered transaction, the exporter might be eligible to use the first sale rule, claiming the price paid at the first transaction as opposed to the end transaction. 

One caution about mitigating tariffs: The administration and relevant agencies, customs, and DOJ have made it very clear that for tariff evasion, enforcement is a high priority. Customs has made several public statements about applying the most severe penalties that are available. They are continuously looking for red flags in the data, including situations resulting in a lower declared value. During Trump’s first administration, DOJ brought several False Claims Act cases based on tariff evasion, and they are likely to do the same this time, as well.

“There are legal ways you can try to mitigate some of the tariffs, but if you are going to make any changes to any product that you normally bring into the country that would result in a change of country of origin or a change of classification or value, I highly recommend that you have it looked at by a customs attorney or a broker, at the very least,” the speaker cautioned. “Make sure you’ve got a legal justification for making that change.”

Chad Whiteman 
Vice President, Environment and Regulatory Affairs, U.S. Chamber of Commerce 
“Regulatory Resizing: U.S. Manufacturing In Focus”

With so many things happening in Washington, it’s an understatement to say that this administration came in prepared and ready to go. On example is on the regulatory front. Although it’s become commonplace for regulatory agencies to actively seek more control, the Trump administration doubled down on its first term when it told EPA for each new regulation it had to eliminate two. Today, that number is 10. 

As a result, we’ve seen phenomena such as EPA announcing in March they’ve identified 31 regulations they wanted to rescind. One is the particulate matter air quality standard. Other examples: In June they planned to announce the repeal of the Clean Power Plant regulation, as well as revision or rescission of the Biden mercury standards for power plant emissions.

The Department of Energy announced it plans to rescind 47 regulations, and all the agencies were releasing similar lists. The most costly and burdensome regulations of the recent past have been related to: 

(1) Climate––Pro-business goals are to rescind endangerment finding, eliminate monetization of greenhouse gases, and pause Inflation Reduction Act funds.
(2) Permitting––Pro-business goals are to eliminate NEPA permitting rules, facilitate permitting pipelines, and restart review of LNG applications.
(3) Consumer choice––Pro-business goals are to preserve consumer choice for appliances and eliminate the electric vehicle mandate.

Executive orders are an effective tool in the president’s toolbox for rewinding regulatory burdens on business and the U.S. economy––as of June 10, President Trump had made 157. Another noteworthy EO focused on ensuring accountability for all agencies, including the independent regulatory agencies such as the Federal Communications Commission, the DOT Surface Transportation Board, the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, the Consumer Financial Protection Bureau, and the Security Exchange Commission, to name a few. In the past, the White House hasn’t had control over their regulatory policies––that has changed. This administration has required all these agencies to submit new regulations to the White House before they are publicly released.

Adam Francis 
Principal, EY Washington Council, Ernst & Young
“Tracking Tax Reform & The Reconciliation Process—What’s In, What’s Out” 

If Congress did nothing to the federal tax bill, expiring tax cuts from 2017 would create an immediate $4 trillion tax burden on America. At the time of the Fly-In, Senate Majority Leader Thune was doing his best to meet an ambitious goal: meeting the president’s request for the Big Beautiful Bill to be on Donald Trump’s desk by July 4. The outcome is now known, but as Modern Casting went to press, it was clear the last thing Republicans wanted on their record was failing to pass a bill and allowing those massive tax increases to take effect. 

Republicans also decided to address the debt limit in their reconciliation process––as of June 10, there was an approximate $5 trillion increase in the debt limit being contemplated as part of the package. 2023’s suspension of the debt limit expired on January 1 of this year, and the Treasury Department has since been using what they call extraordinary measures to money between accounts to pay the government’s bills. That must cease on what’s known as the “X date,” a moving target that is estimated as sometime in mid-August––thereby creating a limited window in which Congress must reset the debt limit and avert turmoil to financial markets. 

When faced with the prospect of a technical default on the U.S. debt and a $4 trillion tax increase, Francis believed Republicans were sufficiently motivated to complete the tax bill quickly and that they would succeed in doing so. 

The House bill had surprises, both in terms of what was and was not included. One big surprise, for example, was a 23% increase to the Section 199 allowable pass-through deduction. Another surprise: A domestic manufacturing incentive that favors companies building new facilities in the U.S. but overlooks those that are not. It was also surprising that the Republicans were more aggressive in their efforts to modify the Inflation Reduction Act. Their bill’s changes to clean energy credits would generate close to $500 billion in revenue. 

Even more surprising was what wasn’t included in the bill. A host of potential corporate tax increases were under consideration––but the House opted not to go down that road. Nor did they pursue provisions related to executive compensation or an excise tax on stock buybacks for corporations.

On the subject of state and local taxes (SALT), the House bill did increase the SALT cap from the current $10,000 level to $40,000 and put an income limitation of $500,000 in place. That provision represents a big revenue raiser in the House bill, potentially $787 billion.

Much was on the cusp of transpiring within the three weeks following the Fly-In. Stay tuned for analysis soon to come from the AFS Washington Office.