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IndustryNet Blog

What manufacturing executives are saying about current business conditions

Posted by IndustryNet on Monday, November 5, 2018

100000295_mfg_executiveA number of new reports out in recent days point to a growing manufacturing sector, though optimism among supply executives has been tempered by a growing unease as tariff deadlines loom.

Last month, the United State Trade Representative announced it was finalizing the rate of tariffs on $200 billion of Chinese goods, raising duties from 10% to 25%.

The tariffs encompass roughly half of all imported products from China and are having a growing impact on domestic supply chains.

The Census Bureau reported a widening trade gap as U.S. manufacturers scramble to procure materials ahead of the tariff deadlines, capital expenditures have leveled off after growing steadily for several months.

Just yesterday, an industry group that has been following the tariff situation closel , found that American companies are paying roughly double the amount of tariffs than they were one year ago. 

The group, which calls itself "Tariffs Hurt the Heartland" reported that American companies spent $4.4 billion on tariffs last month, according to U.S. census data, compared to $2.9 billion spent in September 2017. The tariffs levied on imported steel and aluminum, enacted earlier in the year, accounted for $545 million worth of tariff expenditure in September, while $800 million worth of tariffs were spent on those associated with Chinese imports. 

Related: U.S. manufacturers look ahead as trade gap widens and tariffs close in

Yet, brighter news continues to emerge on the U.S. manufacturing sector this month. The Labor Department reported last week that the nation’s industrial sector grew by 32,000 jobs, adding to the nearly 300,000 manufacturing jobs created in the past year. In addition, a recent report suggests U.S. trade talks with China may have turned a positive corner ahead of the January deadline. 

Cautious optimism among U.S. manufacturers

The Institute for Supply Management's index of manufacturing activity showed the sector remains fixed in expansion mode, and the Commerce Department finds new orders for durable goods edged up in September.

Timothy Fiore, Chairman of the Institute for Supply Management stated in its October "Report on Business": “Comments from the panel reflect continued expanding business strength. Overall, the manufacturing community continues to expand, but at the lowest level since April 2018.”

The looming tariffs, nonetheless, were commonly cited among manufacturing executives responding to the survey.rolled steel tariffs.

“Tariffs are causing inflation,” says one respondent in the Chemical Products sector. “Increased costs of imports, increased costs of freight and increased domestic costs from suppliers who import.”

Another in the Miscellaneous Manufacturing category stated “Mounting pressure due to pending tariffs. Bracing for delays in material from China – a rush of orders trying to race tariff implementation is flooding shipping and customs.”

“Steel tariffs continue to negatively affect our cost, even though we utilize U.S. sources for steel,” says a respondent in the Petroleum & Coal Products sector. “Oil prices put meaningful upward pressure on cost. Continued tightness with truck drivers is expected.”

Mention of the new North American trade deal slated to replace NAFTA, and announced last month also appeared in the ISM’s

October survey. The USMCA, signed one month ago, hopes to increase wages, strengthened intellectual property, and expanded access to markets, while reducing the U.S. trade deficits.

Related: Goodbye NAFTA, hello USMCA. What the new trade deal means for U.S. manufacturers

However, it does little for the American manufacturer that relies on overseas procurement. “NAFTA 2.0/USMCA does nothing to help our company, as it does not address Section 232 tariffs,” said one respondent in the rubber and plastics industry.

For a complete rundown of the ISM report and the week’s industrial headlines, see our post U.S. manufacturing activity weakens for a second straight month

Solutions for domestic sourcing

Changing trade policies have a significant impact on American businesses, with many reexamining supply chains and searching for domestic suppliers. Industrial marketplaces like IndustryNet help industrial buyers connect with suppliers and also provide a direct path for U.S manufacturers to increase their visibility among domestic industrial procurers.







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