Posts Tagged ‘US industry and Trump’

trump-manufacturingAs the US awaits the presidency of President Elect Donald Trump there doesn’t seem to be much middle ground in reactions to his election. This article isn’t going to take a side, but what it will do is take a look at what his presumed policies and people’s opinions of him will do for the manufacturing sector. Doesn’t he mean make the US economy great again when he says “Make America Great Again”? Specifically, we will be looking at the case of carbide dies and tooling as an example.

US manufacturing has vacillated between stagnant and losing ground since the 1980’s. Most American’s can’t even remember a time when America was booming in this important sector. Frustration in the lagging industrial strength of the US, and all of its benefits (jobs) was a major factor in pushing Trump into the oval office. Business owners and workers alike feel change is needed. Unfortunately for Hillary, she never seemed to offer that desired change. Owners of companies have chaffed under what is perceived as pour trade deals for two decades while workers have watched their jobs move off shore. For many business owners the idea of a businessman in the oval office has long been desired. I’m not saying they all felt Trump was the one they all wanted, but anything would be better than continuing down our current path. His rhetoric on fixing the US trade deficient and reversing the trend of US jobs being sent across borders rang true to them and their labor force. Not all of them obviously, but I’ll get to the other side in a minute. For these voters, Trumps deal making and tough talk was a welcome change to continued globalization and further neglect of the rust belt.

Trump promised to renegotiate almost every trade agreement the US is involved in and doesn’t seem to care whose feathers he ruffles in the process. He has stated that he wants the Mexican/US trade deficit evened out through tariffs against Mexican imports.  He said he would put a 45% terrify on Chinese goods as well, forcing them to stop their currency manipulation which artificially gives their goods an advantage. Furthermore Trump says he will send an army of lawyers to contest China’s unfair practices such as government subsidizing to bolster industries. The Chinese government, known for hard dealing itself has bulked at this, calling him a misguided fool in party run newspapers. Perhaps most importantly however, Trump wants to cut the tax on corporations. This could lead to either greater investment in the struggling manufacturing sector or just more money in the pockets of the wealthy – what Hillary called “Trumped up economics.”

On the other side of the fence, business doesn’t like volatility and Trump offers that in spades. Business flourishes in environments where the future is predictable. Trump business critics point out that a trade war with China will only hurt us both and tariffs on Chinese goods will only move production to other countries like Vietnam,  where labor is 20-23% lower than in China.

Now for our case study. Carbide dies are an essential part of production in many industries. They are the parts that make parts. Carbide dies and tooling are used to construct everything from nuts and bolts to medical equipment and musical instruments. China has recently entered into the market making lower end products, by making up for a lack of quality with low cost tooling they have gained a foothold. US manufacturers using these products have been short sighted, as it cost more to stop production and change dies than the money they saved on inferior products. However, China still has entered the market in areas where it is easier to mass produce dies. A tariff on these dies would be of some benefit to the US die makers but wouldn’t stop the competition that comes from Japan. Additionally, 80% of the element of carbide is located in China, however tariffs wouldn’t affect imports of carbide since the Chinese won’t export it. They are keeping their supplies to themselves! They are playing the long game when it comes to carbide, a resource that some experts have said the planet will run out of in 50 years! This should make you stop and think for a moment. This is big. The Chinese aren’t looking for the quick dollar, they are shrewd. They know the price will go up so they are holding out while the US rushes to capitalize on all its natural resources.

If you have ever played a strategy game where you fight for resources you would know that selling your finite resources early is a bad decision. The US doesn’t have a captain at its helm, it is just reacting to generate the greatest profit immediately. It is the hope of so many in our nations industries that not only can Trump level the playing field but bring the leadership we need to manage our nations resources, both human and natural. Love him or hate him, US industry needs to stick together and maybe even hope for the best under The Donald.

 

Advertisements