Moldmaking, Molds and Tariffs
Gardner Business Intelligence addresses interest and concerns with the ongoing tariff changes.
MoldMaking Technology along with MMT’s sister-brands have received significant interest in understanding how recent tariffs will affect the moldmaking industry. The issue is an important but complicated one as tariffs can result in retaliatory tariffs, furthermore, tariffs can also be levied on one or several specific countries. Much attention is often paid only to tariffs in terms of the total amount of trade that they are likely to impact in one direction or from only one country. The reality of the situation is that many countries are simultaneously changing their trade stances with other nations. The U.S. has been adjusting its trade position not only with China during 2018, but with its two largest trading partners Canada and Mexico. The new U.S.-Mexico-Canada Agreement or “USMCA” was signed in late November and now awaits each country’s ratification by their respective legislatures. In addition, Britain’s exit from the European Union, frequently referred to as “Brexit” is due to occur in late March of 2019.
Brexit, unlike the other trading nations previously addressed, will have a unique impact on European trade as London is one of the world’s largest financial hubs with significant involvement in many international financial deals. Many economic white papers have taken efforts to explain the impact of Brexit on foreign direct investment and the ability of firms to borrow capital. The complete Brexit process is also taking place on a much longer timeline than that of America’s changing trade rules with critical trading nations. The UK’s new trade rules post-Brexit are not expected to take effect until January 2021. Firms who buy from, or sell to, European firms may need to be more aware of the financial conditions of firms that are highly reliant on foreign direct investments “FDI”. FDI plays a particularly important role in the technological development and the ability of firms to capitalize on technological innovation. Several economists have written extensively on the link between stable well-regulated economies and the ability of firms in these areas to receive investment funding.
Through 2018 there have been several tariffs put into place that have affected the price and trade volumes of aluminum, steel and a significant portion of other moldmaking and mold-related goods. Initial tariffs put on steel and aluminum under Section 232 (allowing tariffs on goods due to concerns over national security) took effect on June 1st, 2018. Since then a host of other tariffs under Section 301 (allowing the U.S. to take whatever appropriate trade actions it deems necessary towards countries with unreasonable or discriminatory trade practices) have come into effect. As of late 2018, the latest and most significant list of such Section 301 tariffs took effect in late September, affecting $200 billion of imports across more than 5,700 types of products, known as “tariff lines”.
Breaking it Down
Of the thousands of affected products, Gardner identified at least twenty-one tariff lines which are of critical or substantial importance to the moldmaking and molding industry. These lines, addressed by their dollar impact- generally can be grouped into injection or compression molds for rubber or plastics, aluminum and lastly molds for rubber or plastics other than injection molding. The majority of these tariff lines took effect in June and July of 2018, thus the Gardner Business Index data for the fourth quarter of 2018 and afterwards may provide some initial ideas as to the effect that the early impacts of tariffs have had on the industry. In December of 2018, the U.S. determined to delay further tariff rate increases on Chinese goods for an additional 90-days. This gives both countries until March 2nd, 2019 to reach a trade agreement before higher rates take effect.
Among mold-related manufacturers serving specific end-markets, Gardner’s business index respondents have reported faster new orders growth during the later-half of 2018 in automotive, forming and fabricating and custom processing.
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