The story of tariffs and manufacturing has been a rollercoaster. With the United States and China being the world’s most prominent players, the global economic impact is lengthy. This past September, China waived its import tariffs on some goods from the states, including shrimp and cancer treatment drugs. However, this month, the Chinese government threatened $2.4 billion sanctions against the U.S. for noncompliance with a World Trade Organization ruling dating back to 2012. The impact on manufacturing has also been just as bumpy. Some industries benefit from the tariffs, while others are hoping for a swift end.
The China-United States Trade War
When it comes to trade, the discord between the United States and China has been complicated. China is the world’s largest exporter, while the U.S. is the largest importer. The strife dates back to George H.W. Bush’s administration and the Tiananmen Square protests of 1989 when congress began imposing constraints on trade with China. Fast forward to the current administration. President Trump has advocated for tariffs to reduce the U.S. trade deficit. As of October 1, U.S. tariffs set to rise to 30 percent on $250 billion of Chinese products, with another 15 percent increase scheduled for December 15.
Impact on Manufacturing
Glue Machinery Corporation has seen increases in all categories of gluing equipment sales in the last six months. In part, the tariffs or threat of tariffs are responsible for this increase. In fact, many of our customers have communicated concern that tariffs are adding costs to their products. More importantly, the tariffs have added a level of uncertainty that has forced manufacturers to seriously consider bringing assembly work as well as research and development back to the states.
On the other hand, we have also encountered industries that have benefited from the tariff war, specifically cabinet manufacturers. The American Kitchen Cabinet Alliance filed an antidumping petition against China, claiming the government’s “manipulation and unfair trade practices” have led to a more than 75 percent rise in Chinese imports of kitchen and bath cabinetry since 2015. As of October 4, preliminary duties ranging from 4.49 to 262.18 percent have been imposed, with most Chinese cabinet importers facing duties of 39.25 percent.
We have every expectation that the USA’s relationship with China will stabilize and that the tariffs will be minimized. However, manufacturers will continue to operate within the uncertainty of the situation. They will incorporate contingency tariff costs into their production budgets and raise prices.
Glue Machinery Corporation has now been in business for over 50 years. As the majority of our products are sold to manufacturers in the USA, followed by Mexico and Canada, our experience with the current tariff situation is limited. European rules and regulations have traditionally made it quite difficult to sell there. Furthermore, import duties in some South American countries are too high to allow for the purchase of our equipment, which is of the highest quality. As a result, Glue Machinery Corporation’s prices are at least three times higher than our Chinese counterparts and, therefore, prohibitive to any potential Chinese sales.