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The Effects of Industrial Tariffs on Manufacturing

Posted by Clarion Safety Systems on 17th Nov 2020

For many U.S.-based manufacturers, the current trade war with China has been a major sore point and has negatively impacted operations. Owing in part to this, while the rest of the U.S. economy experienced a boom, the manufacturing economy was suffering a recession long before the pandemic hit. Industrial tariffs have driven up the cost of goods and created logistics nightmares for companies all around the world.

Beginnings and Reach
The trade war began when the current administration imposed trade tariffs on Chinese imports in 2018. These were aimed at encouraging China to renegotiate some of its trade dealings with the U.S. Instead, China levied its own tariffs against America.

Now, even Canada has been pulled into the trade war and has threatened to impose its own tariffs. Canada is not known for its involvement in wars or global political scandals. Yet, America’s peaceful northern neighbor has decided to meet it tit-for-tat after the current administration levied tariffs against it and Mexico. In the summer, Canada proposed $2.69 billion in tariffs against America. This followed America’s reinstating of previously lifted tariffs, after the U.S. government noticed an alleged increase in aluminum imports from Canada.

Impact on Manufacturing
American manufacturers have largely suffered from the tariff wars and have aired their displeasures. Consumers have also shared this sentiment. Even the U.S. Chamber of Commerce has publicly stated that the tariff taxes American businesses and consumers more than it taxes China.

For as long as the U.S. government continues with its current plan, Americans may need to find new ways to adjust. The pandemic presents its own unique challenges, but solutions do exist. For instance, businesses can lobby government officials while continuing to diversify product lines.

A Trade Deficit Unmoved
When President Trump first took office in 2016, the trade deficit with China troubled him deeply. During his first year and a half in office, the deficit continued to grow. America’s global trade deficit also grew exponentially. The trade war helped to reduce the trade deficit with China, but after renegotiations, estimates suggest that the trade deficit stands exactly where it did when he originally took office. Meanwhile, America’s deficit has worsened.

Interruption of Free Trade
For better or worse, America’s economy is driven by capitalism. However, the trade war has compelled the U.S. government to become involved in dealings usually left to the forces of free trade. After America levied tariffs on $370 billion worth of goods from China, the manufacturing giant responded with tariffs of $185 billion on American goods. In response, the U.S. government struck a Phase 1 deal to purchase a specific value of goods into 2021. This is precisely what disrupts free trade.

Effects and Outlooks for Manufacturers
Ahead of the pandemic, tariffs contributed to manufacturing slowdowns. Companies needed time to find new suppliers or move production facilities. Several still have not done so. Some found it so hard to pivot successfully that they did away with entire product lines. The current manufacturing boom (this past October saw the strongest manufacturing growth in the U.S. in two years), according to many sources, is being attributed to the pandemic, and the increase for certain goods during this time.

In terms of the outlook from manufacturers, the Association of Equipment Manufacturers reports a growing dissatisfaction with the trade war and its effects on manufacturing. It also touches on how the pandemic provided a mixed bag of results for manufacturers, with some companies thriving while others struggled. In spite of the uncertainty, some professionals within the industry feel optimistic about its future.

Expectations for the Future
There’s no question why some manufacturers look to the future with some degree of unease. The pandemic has shaken the American economy and plunged it into a recession, which economists say may take years to recover from. The political future of America also seems uncertain. While Joe Biden has been projected as the winner of the U.S. 2020 presidential election, Donald Trump has not yet conceded. This environment can make it difficult for manufacturers to plan for 2021. Economists also struggle to project numbers for the future of the market. Both Biden and Trump have vastly different views of what the American economy should look like in the coming years and the role manufacturing may play in this.

Supporting Manufacturing Now and in the Future
Regardless of the political or economic landscape, companies still need to prioritize the safety of the products they manufacture and of their workforce. This constant is one factor that can be planned for with confidence, and that Clarion Safety can assist with. From equipment safety labels to facility signage, be in touch to let us know how we can help ensure supply chain stability and apply best practices to your visual safety communication strategy.

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