How Trump's prices cause pain to certain American manufacturers

After Donald Trump was elected president, Craig Sous was preparing for an increase in business for his manufacturing company based in Pennsylvania, which manufactures robotics systems used in food packaging. Instead, he is now faced with higher costs and a drop in demand that led him to delay investments in his business and seek to add manufacturing outside the United States.

It is the most bizarre roller coaster race, where our entrance entrants this year was Sky High, then it was as if the air had come out of the ball, said Souer, CEO of JLS, that his family started 70 years ago. No one has seen the magnitude of this coming. I do not know if it was his plan or not, who knows, but it took what we thought was a year of rebound and made it really bad. We have business but it is far from what we expected. And weren't alone.

It is an experience that cuts one of the declared objectives of Trump policies: since its entry into office, Trump has imposed a range of import prices which, according to him, will revive American manufacturing by protecting companies against competition abroad cheaper and encouraging companies to move their production in the United States

However, while some companies, including in the pharmaceutical and automotive industries, have announced its intention to extend manufacturing in the United States after the Trumps price announcements, others already creating their products in the United States say they do not feel the prices. Instead, the prices have brought higher import costs for the materials and machines they need to make their products in America, as well as the drop in customer demand and an uncertainty climate that has made it difficult to invest in the widening of their American operations.

Since Trumps' prices have entered into force, the manufacturing activity has dropped to its lowest point in five months in the highest costs, a drop in income and a drop in exports, according to a survey in April with manufacturers by the supply management institute. Distinct surveys of the Federal Reserve also showed a drop in manufacturing in several regions in April, and the Bureau of Labor Statistics revealed that the manufacturing industry as a whole reduced approximately 1,000 jobs last month, in the midst of overall employment growth.

Directed in the wrong direction, said Tim Fiore, chairman of the ISMS Manufacturing Commercial Studies Committee. When income starts to drop, you cannot pay your pay. You cannot pay your suppliers. You start to release people, you start to reduce. You start to watch your dollars.

He said his investigation revealed that export orders had fallen to an alarming level in April, similar to the figures observed during the great recession almost 20 years ago. About half of the companies interviewed by the ISM said that they had faced higher costs in the previous month, against only 14% which declared cost increases at the end of last year.

You expect prices to increase as demand increases, but demand has not increased, said Fiore. So here we have the collapsed demand and we have growing prices. It is almost like the impossible equation.

Last month, Trump placed a minimum rate of 10% on almost all goods in the United States and a rate of more than 145% on goods from China, with the exception of electronics which has a 25% rate of rate. He also placed a 25% rate on imported steel, aluminum, cars and car parts.

For the Sousters food packaging company, he says that the prices have made it more difficult to remain competitive. The key robotics equipment he needs to manufacture his machines in his York, Pennsylvania facilities, is manufactured in Europe, and companies like his must now pay a tariff of 10% to import European products into the American souser, said that he had no other choice but to transmit this cost to his customers in the form of higher price.

Scott Livingston, CEO of Horst Engineering at East Hartford, Connecticut, said that he had also seen a peak in the costs of the materials he uses to make parts and components for the aerospace and defense industries that use steel, aluminum, cobalt, nickel and titanium from all over the world.

He said that he did not have the ability to transmit these higher costs to his customers, who include large aerospace companies, due to the long -term nature of the contracts he has with them. This means that higher costs will reduce its results.

I think there is good that will come to existing American manufacturers. However, if I cannot strengthen capacity because my entry costs are increasing now, what have we won? Said Livingston.

In addition to the higher cost of importing components and materials used in products manufactured in America, companies are also faced with higher costs to import the machines and tools they need. Livingston has just bought several machines in a company in Japan and planned to place another order later this year, which it now forecasts that it will cost more if the prices prevail. He said he was unable to find this type of highly specialized equipment from an American company.

Companies have filed more than 1,000 requests for exemptions on the manufacturing equipment they say they need China in order to build their products in the United States, according to public comments filed with the American commercial representative. Requests, which intervened before Trump increases prices on China more than 145% last month, includes Tesla and Ford requests for equipment which, according to companies, is necessary to make electric vehicles in the United States

Positive changes

Some companies, however, have said that they were Trumps optimistic prices will encourage more American customers to buy their products to avoid paying prices on imports.

Drew Greenblatt, president of Marlin Steel Wire, based in Baltimore, which manufactures wire baskets mainly used by medical, aerospace and food processing customers, said that he had just received an order for five tractors of a customer's product that bought from a foreign competitor.

Due to these prices, they came to us, he said. It is five steel tractor trailers that I will buy at my aciérial in Tennessee. They are therefore enthusiastic about this. I had to order all kinds of boxes from my local boxing company. I had to order all kinds of pallets for my local pallet company, and my employees will work overtime trying to follow this.

Greenblatt said 25% Trumps on steel imports increased the cost of his steel, even if he buys from an American steel mill due to higher demand than the steel factory now sees. Steel prices have jumped since Trump announced his prices.

However, he sees the advantages prevail over higher costs.

With Greenblatts growth expecting prices, he also invests in new equipment that he buys from companies in Illinois and Indiana, and he seeks to hire 10 people with a starting salary of around $ 25 per hour. He hopes that he could double the size of his business to more than 200 employees, if Trump is able to conclude agreements with other countries that would reduce the price that these countries charge on his products.

Just asked equality. If his equal, well prospered, well prospered because it was so innovative, so intelligent, we have such a great technology, we have such a big talent, said Greenblatt. But were paralyzed because the other guys cheat.

Other companies, however, have said that they saw a lower demand due to the uncertainty that the prices have created for their customers. Sousser said that he had seen orders for his products that stop bakeries and other food companies to which he sells his equipment, because some of them also see higher costs following prices.

The prices have led him to suspend some of his own investments in his business, and he now plans to manufacture some of his robotic systems in Italy, rather than in Pennsylvania, for his customers in Europe.

Even for companies ready to see an increase in their sales from prices, the changing policy of the Trump administration in the first months prevented certain companies from making long-term decisions concerning the expansion of their American manufacture, said Scott Paul, president of the Alliance for American manufacturing, which has generally supported prices as a tool to support the manufacture of the United States.

Should I make this decision to open an American installation or make this investment? For many people, you cannot answer this until you know with absolute certainty what will be politics, he said.

Paul said that his organization was putting pressure on other political measures that could compensate for part of the negative effect of current prices, such as various tax alternatives for manufacturers of legislation currently worked at the Congress.

Were very at a stage of training of all this. I also think that it is right to say that it is also the phase where you have the medication, but not sugar, he said. You are in your boat, you try to cross the storm in many ways, and I hope there is sun and calm water and the wind behind your back when you cross it.

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