The $155 billion in North American electronics trade has grown and matured in the 25 years since NAFTA was signed. Leveraging the industrial strength of all three countries has allowed companies to maintain and grow their manufacturing operations. These tariffs undermine the partnership that U.S. and Mexico have formed to compete in the global economy.
Kury & Yanez: As we operate under a special maquiladora status, we’re currently working with our import/export expert internally as well as with authorities to evaluate the impact. While tariffs are always particularly hard to navigate, we don’t see an immediate impact as of right now with our daily shipments being made from Mexico to the US.
Wang: There’s a slowdown in the decision-making process for most of those companies who planned to move electronics manufacturing and its supply chain from China to Mexico, especially since the Trump government may increase tariffs to 15% or more if Mexico fails to resolve illegal immigration. Trump may not be satisfied if Mexico wants to make progress step-by-step. He already did this kind of things on the negotiations with China. Mexico may not step back quickly because lots of immigrants, moving from other countries, are force to stay in Mexico to wait for review and approval for a long time. Mexico would carry a large burden.
EBN: This is part of ongoing trade issues and tariff that are having real consequences, some unintentional. How do you see these issues impacting you and your customers?
Keith: For Supply Chain Resources Group's core business, its roughly a zero-sum game. We provide services to OEMs in all the primary beneficiary destinations of Trump's trade policy. So, if our business in China declines dramatically, we would expect that decline to be offset by increases to our business in other low cost geographies around the world as we help our OEM clients relocate production and key upstream suppliers.
The impact on our customers however is not a zero-sum game. They are spending an additional 3.5% to 6% of cost of goods sold (COGS) over the next 12 months to relocate production to avoid tariffs, and that is excluding the soft costs of start-up inefficiencies in a new geography. But the real cost incurred by our OEM clients is in the uncertainty, or what I refer to as the continually changing certainty, of how undefined trade and foreign policy objectives cast a long duration shadow over key investment decisions that need to be made today. Uncertainty is bad for business and ultimately creates a price borne by all consumers, employees, and stakeholders regardless of their home geography.
Mitchell: Many IPC members are reporting a feeling of whiplash from the Trump administration’s multi-front trade disputes, as well as frustrations about the lack of clarity on the supply chain impacts.
The electronics industry has some of the most complex supply chains and thinnest profit margins of any industry in the world. In this competitive environment, marginal cost increases matter a great deal, especially considering that electronics components may cross borders multiple times on the way to final assembly.
Trump administration tariffs have already led to shifts in supply chains, but it would be a mistake to conclude that these shifts have always or usually benefited U.S. manufacturers. For every call I receive reporting that the tariffs have helped a U.S. manufacturer, I have received calls from two others that the tariffs have hurt.
Kury & Yanez: Eventually, there are always consequences. They may not show up immediately, and for us it makes it even harder to keep track of them as we may be subject to tariffs only when a PO is placed (not necessarily at the quotation stage), or when the goods are actually entering the US. It complicates our business, but since the rise of tariffs against China and now Mexico, I believe we’ve addressed most of our customers’ concerns either through clarification of HTS Code making their products exempt, or thorough analysis of the overall manufacturing and content of the product to be able to qualify it as a NAFTA product, for example. These “services” are brought to the table by our sales team worldwide to provide all the necessary information to our customers, for them to make an educated decision in line with their business requirements.