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The trade war and the resulting tariffs are forcing manufacturers to become more nimble and risk-focused planners.

It’s been over a year since the first shots were fired in what has become a multifront trade war. Increasingly, experts say that companies should plan on trade hostilities for the long haul. We talk to industry watchers and management consultants about how companies can deal with the current round of tariffs, the importance of risk planning and how a new NAFTA might help U.S. manufacturers.

Despite the hope that things could return to normal soon, that’s not likely, says Omar S. Nashashibi, founding partner of The Franklin Partnership LLP and head of government relations for One Voice, the advocacy program of the Precision Metalforming Association and the National Tooling and Machining Association.

“Companies have been slow to think of this as the new reality,” says Johan Gott, a principal at management consulting firm A.T. Kearney.

The trade war doesn’t seem to be having the hoped-for effect of bringing manufacturing back to America. In a recent U.S. Chamber of Commerce survey of large U.S. companies manufacturing in China, 40 percent said they were planning to, or already had, shifted manufacturing to other offshore locations such as Vietnam, India and Malaysia, according to Forbes.

As for small and midsize manufacturers in China, they are typically serving Chinese customers, and so are unlikely to move, adds Nashashibi. Others that import goods from China are adopting a “China-plus” strategy, he says, which means they are developing second, non-Chinese, sources.

Meanwhile, there were more tariffs imposed across several regions over the summer.

Decoding USTR Section 301: More China Tariffs

In September, the U.S. added 10 percent tariffs on $200 billion of imports of various kinds from China and threatened to increase that to 25 percent in January if no deal is reached with China.

The new tariffs cover a wide array of consumer goods such as food and apparel, but they also include more industrial items. Among them are chemicals; various oils and gases; rubber; products derived from iron, steel and other metals; industrial machinery; and vehicles and vehicle parts.

Additional tariffs on Chinese imports kicked in on Sept. 1, although some that would have affected the Christmas shopping season were delayed until Dec. 15. China retaliated with its own tariffs on U.S. exports, to which the U.S. responded by increasing the tariffs on another group of goods to 30 percent, says Nashashibi. Unless something changes, those kick in on Oct. 1.

“That’s another layer of disruption” that could have a substantial impact on capital equipment purchases, Nashashibi says. Last year, the U.S. imposed 10 percent tariffs on $200 billion of Chinese imports above and beyond the tariffs on aluminum and steel. Then in May 2019 tariffs were upped to 25 percent. Then in September, U.S. tariffs increased by another 5 percent.

“A lot of companies already budgeted the money and planned financing for that equipment at the lower 10 percent or even the 25 percent,” Nashashibi says. Now they have to adjust to 30 percent.

Meanwhile, in August, President Donald Trump officially declared China a currency manipulator, which “is actually a big deal,” says Nashashibi. The declaration opens the door for U.S. companies to sue Chinese companies on the basis of currency manipulation being an illegal subsidy.

If they win, they can ask for the imposition of countervailing duties on the Chinese imports.

Some companies have been positively affected by the trade war. Read “Amid Tariffs and Trade War, Manufacturing Shops Gain New Business.”

Is a New NAFTA Coming This Fall?

One ray of hope is for the United States–Mexico–Canada Agreement, also referred to as the “new NAFTA,” to be approved by the U.S. Congress this fall. House Speaker Nancy Pelosi is working hard to deliver the Democrat votes needed for approval, notes Nashashibi. 

Although manufacturers’ businesses are still strong, they worry about a coming recession. Approval of the new NAFTA would increase their confidence in the economy, he says. 

“It’s more of a symbolic hope that all these tariffs might end in solutions,” he says. “Approval of the new NAFTA could alleviate many of the concerns of manufacturers over further disruptions in their supply chains.”

EU Tensions on Tariffs Heat Up

“There are increasing tensions between the European Union and the U.S. that don’t appear to be heading toward resolution anytime soon,” says Nashashibi. Of specific importance are new tariffs the U.S. threatens to impose on EU copper-based alloys, including copper plates, brass, bronze and some nickel-based items.

“Approval of the new NAFTA could alleviate many of the concerns of manufacturers over further disruptions in their supply chains.”
Omar S. Nashashibi
Head of Government Relations for One Voice, the advocacy program of the Precision Metalforming Association and the National Tooling and Machining Association

The new tariffs result from a World Trade Organization ruling in a long-running dispute over government subsidies of large aircraft manufacturers.

The WTO ruled in the U.S.’s favor, opening the door to as much as 100 percent tariffs on these items. This could be a major disruption to U.S. manufacturers in the aerospace, automotive, defense, medical and electrical industries, according to Nashashibi.

In an August letter to U.S. Trade Representative Robert Lighthizer, the Motor & Equipment Manufacturers Association (MEMA) argued against the tariffs, noting that “U.S. alternatives are not being manufactured to the standards necessary for public safety, not available in necessary quantities or not available at all.”

MEMA warned that the tariffs could encourage production to move overseas, impacting small and midsize suppliers.

How are the trade war and tariffs affecting your shop’s business? Talk to your peers in the metalworking forum. [registration required]

Talk to Us!

TRUMP 2020 MAGA!!!!!

   

I'll second that!!!

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Wake up people! Would you hire someone that claims to be the best at everything with zero evidence to back it up? Someone at refuses to read the morning briefs stating he is smarter and more informed than anyone around him including long time experts that their job is to inform the president! The next time one of your employees tells you he has a idea to improve the business and save you money, Slap him down, no one knows more than YOU!

1  

biden and sanders have like 80 years in government...havent done a damn thing

   

My company manufactures tunnel equipment in Texas.

If we need to pay a little more for steel, then so be it. China is a predator. It irritates me to hear Trump make the occasional positive comments about China.

I doubt that they will change,

MAGA and may God bless President Trump

1  

The next time anyone blesses the president they need to add all the poor children in cages separated from their parents, the porn star and playboy model trump was screwing while his wife was pregnant and don't forget the family's of thous killed in El Paso after his hateful speeches lead to the mass shotting.

1  

Won't the Democrat's be surprised again in 2020 :)

   

They will be surprised when they wake up and see Joe Biden got elected to the Presidency after Trump was impeached and faced Federal charges. :)

2  

LOCK HIM UP!

1  

Trump did nothing wrong no impeachment will happen and the people will reject the socialist ways of the dems.
My company has never been better all time highs everwhere. KEG 2020

   

We want to know how this is impacting manufacturing businesses. Share your story here.

   

Aerospace has definitely taken a hit. That branch of the economy has had a pretty profound effect on our smaller size town of about 12k. Roughly 400 folks have had to relocate or change professions in the past year due to layoffs from several local manufacturing businesses. That's 3.3% of our population, that's a huge deal and effects a much larger span that just those folks- it effects entire families.
We do military contracts as well- and that business (which is not aerospace) has slowed dramatically too. Even though parts for those contracts are made locally, some of the tool steel for molds and chemicals to complete the part has had tariffs on them and has increased our overhead cost somewhat- and our contract pricing is set, so it directly effects our margins on those parts.

I'll be voting for anyone BUT trump- republican or dem, doesn't matter- but he is doing everything he can do to contradict making America great again! I'm failing to see any profit or good that has come from his presidency thus far. Lets get an educated candidate back in the seat who can relate to working class and treat ALL Americans with respect!

   

Thanks for sharing JB. It hits home when you share statistics to the effect of 400 trades folk without work, 3.3% of your local area compounded by the families of those workers who feel the effect of tariffs at home.

   

I agree. Trump may have a lot of experience with real estate, although his Dad bailed him out several times, and he filed for bankruptcy several other times, he has no idea how global supply chains work..............and he has no idea about the history of world trade. Caterpillar Inc. in 1988 - used about 450,000 individual parts to make their tractors. 80% of those parts were made in house, most in the USA. In 2015, when I retired, 80% were made by suppliers, many outside the USA. They didn't do this because they wanted to hurt their employees, they did it to reduce costs because their customers demanded a lower price.

Trump is stupid to think we can be a "business island".

   

Anyone that thought the current NAFTA was good America needs to go back and learn Business 101 over again. You can use NAFTA for Trump bashing all you want but the fact still remains that NAFTA was bad for us great for them! The tariffs imposed on the products we sell have made us look for American made replacements and in the cases of those that there is no American made replacement we found other ways to absorb the tariff. Eventually China will be the big loser and America will be the big winner and nobody, not even Trump said it was going to happen overnight.

   

lost my job in part due to the tariffs on steel. I worked for a small company who designed and built custom displays for retail. Customers would not pick up the increases in the price of steel which have almost tripled. They would much rather wait an extra month or two for their product to come from China. Tariffs are hurting every consumer in this country. Trump does not understand what a tariff is and how it effects everyone.

   

We are sorry you're out of work because of tariffs George. Manufacturers need skilled trades folk now more than ever before. We hope you find something else soon. You can post your credentials on the Forum part of the site and put feelers out.

   

lost my job to original NAFTA. Could be retired in 3 years at 50 with full benefits and supplemented SS until 65. Go for it Trump. Bring the jobs back. I will pay extra for Made in USA tags. MAGA 2020

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I will agree that NAFTA was not a good idea. However these tariffs are just as bad. There is something called a happy medium. You can go too far in either direction right or left. I believe that some tariffs are helpful but are not the solution. A better solution to bringing jobs back to the USA, (and I say USA because just saying America, you are talking about more than one continent let alone one country) would be to start taxing those companies that are moving out of the USA just to save a buck while still claiming to be US companies. If they are and always have been Chinese companies so be it. The ones that are hurting us the most are those companies that are making their products in China for pennies using child labor and then selling them here for exorbitant prices and not paying any taxes. Just for the record Trump is one of them who doesn't pay taxes and has real estate all over the world. Instead he makes his money by filing for bankruptcy so he doesn't have to pay his bills. Which is all quite legal if you make or have enough money. As for my company he has just about put us under. We make medical research equipment. one off stuff and the researchers grants have either been held back or just no longer available due to the budget cuts and higher costs of materials.

   

I feel bad for the people and companies being affected negatively right now by the tariffs but I really think these new tariffs are long overdue! It the long run it will force companies to buy American made products and start MAGA as our great president promised! Keep up the awesome job Mr Trump the majority of Americans with a brain are still behind you! To those that don’t understand world economy, do some research...

   

One of my clients manufactures park benches. The end pieces are cast in China - US foundries don't seem to want the work - or else they need to charge really high prices to cover their expenses and make money. This is a pretty low-end casting and is a good part to outsource to China. But now that Trump has placed tariffs on the parts used to make the benches, either the municipalities that buy them will have to pay more taxpayer money to buy them, or they will have to buy fewer - and leave the old folks in the parks with no place (or fewer places) to sit.

Trump's actions are damaging our economy, not helping it at all, based upon what I read - from a variety of sources. More than that, the tariffs are NOT being paid by the Chinese. WE are paying the tariffs. ... and what is he doing with the money he is extorting from us so that he can play his foolish game of big shot? Talk about raising taxes on American business. These tariffs are the biggest tax increase ever!

Of course, this trade war could mean an increase of business for Vietnam and other low-wage, low-overhead countries, but the transition could take years... and, for what? In the meantime, many smaller American businesses that rely on goods or parts from China will likely fail.

There's gotta be a better way to deal with any Chinese currency manipulation and other problems. These broad tariffs are hurting us more than helping the US economy.

Nah, Trump is hurting our economy and damaging our relations with other countries. No one will trust America if Trump continues his behavior. I think that he has to go. I will not vote for him. He lied when he ran; made rash promises that he could not keep and has lied repeatedly for years. He appears to be almost intentionally messing up our economy & our government. That is not good.

Trump is not making America great in any way; his actions are hurting America, while his followers follow blindly. I don't get it.

   

The impact of the increased tariffs has the potential to touch all of us in this industry, more often than not we do hear the bad, but we have heard of shops who have gained new business.

We shared this article a few months ago: https://www.mscdirect.com/betterMRO/metalworking/amid-tariffs-and-trade-...

   

How in the world can anyone expect America to make a come back and bring businesses back to the United States in a 3 year period that was lost from trade agreements made years ago that caused thousands of company's and small businesses over the years to go bankrupt from loosing business to China and there slave labor. It will take some time and thinking out of the box, But we as Americans can do this!! Trump 2020

   

Amen Jody! Also what about the aging skilled labor force that's not aggressively being replaced--

   

Wake Up. Trump is a Criminal pure and simple! Been Sleeping? Need examples:
Judge gist fined Trump $2million for taking other peoples money that was donated to his charity to enrich himself, How about Trump University lawsuit, Ukraine, Porn star payoffs, etc!

   

Anybody who thinks Trump is a strong leader is either uneducated or happy with tax cuts that they personally benefit from, despite the fact that it is increasing our national debt.

   

Since 1998 and renewal of most favrored nation with China, the trade deficit has driven the Federal deficit by making the taxable income base too small. Trade with China accounts for about half of the trade deficit which was 866 billion dollars last year. Without balancing trade and growing the tax base, reducing Federal spending would remove the stimulus that keeps the economy from going into a major depression.

   

Trump figured this out years ago and out of a sense of duty decided to run for President so he could try and fix the problem caused by the socialist globalists and our last three Presidents who are economic morons. If you have not heard, he donates his Presidential salary to charities. The socialist globalist Democrats and their media want to continue to rape our economy and are in full obstruction mode. Family misery elected Trump and not the Russians.

   

Personally my business is up the last several years even with a down ag and mining economy which is what I primarily service. I was already using US steel and have only seen about a 10-20% price increase on materials. I have picked up a lot of work simply because the manufacturers can not deliver parts in a timely manner due to issues with obtaining items from their cheap China based suppliers as well as many quality control issues with the parts available. In particular I have picked up a bunch of Cat parts as their offshore replacement parts don't hold up like the older us made identical items and the owners have figured this out and are looking for aftermarket solutions rather than replacing the same junk over and over again. Something needed to be done about Chinas unfair trade practices for years. I am glad to see it finally getting done.

   

We have heard that some businesses, similar to yours, are benefitting in this economy. Thanks for sharing your personal experience.

   

I've worked in manufacturing for over 20 years and can say the tariffs have definitely helped US manufacturers. Tooling costs for high dollar steel molds were almost exclusively going to China but now it is more competitive and that money is being spent here in America. The trade deficit between the two countries is ridiculous and has to be addressed at some point.
It is only fair to have balanced trade between countries with similar goods. Common Sense.

   

Undisciplined globalism drains capital and jobs from every economy that consumes more value than it creates. We need a market access charge on all foreign currency being exchanged for dollars to bring the dollar down to parity. Right now the dollar is 25% overvalued which over prices and stunts our exports. We need to counter the VATs and tariffs at just about all foreign national economies that also stunt our exports. For the last 25 years the trade deficits have reduced Federal, State, and local tax revenue by reducing all income tax bases and have created enormous Federal deficits and have underfunded infrastructure. At best our last three Presidents were clueless economic morons. If they were not clueless that leads to an even bigger problem. My business is directly affected by all of this and I have to take this situation very personally.

   

It looks to me like MAGA stands for Manufacturing America Going Away!

   

It looks to me like MAGA stands for Manufacturing America Going Away!

   

Looks like MAGA stands for Manufacturing Again Great for America! Except for the for I had to add, the tariffs are going to help all American citizens and companies in the long run. These tariffs were long long overdue, finally a president that understands how the world economy works and is doing something about it. Keep up the great work Mr Trump “signed by Americans with Brains”

   

Trump is just a pos if daddy hadn’t had money he’d be saying would you like fries with that he’s a joke highest Deficit in years and the sooo good bs

   

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