What should manufacturers do to limit fallout from tariffs in a time of real economic boom? We talk to industry advocates and financial advisers to explore the best options for reducing costs, right-sizing capacity and controlling risk exposure.
U.S. manufacturers are starting to feel the impact of tariffs implemented on China. As the number and cost of tariffs—already affecting products in the hundreds of billions of dollars—rise, companies are taking steps to protect their businesses from the effects of the trade war.
With such a strong U.S. economy, manufacturers are staying busy, 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.
“They are cranking out parts faster and more often than they have in generations, they tell us,” says Nashashibi. He worries, however, that some of that demand could be overordering by customers anticipating even higher tariffs.
Meanwhile, prices of steel and aluminum have skyrocketed by 30 to 50 percent, and lead times for these materials have lengthened significantly, he says.
“In some cases where you could get it in three to four weeks, now it’s 18 to 20 weeks. One person told me they were quoted a wait time by domestic steel producers of 361 days,” he says. “And we expect that to get worse.”
The impact has shown up in corporate earnings reports. Caterpillar reported tariffs added $40 million in costs for materials during its third quarter, while Stanley Black & Decker expects that tariffs cost it an additional $50 million this year and could rise to $250 million next year. As a result, it plans to raise prices in January.