Manufacturers around the globe have been keeping a close eye on the Trump presidency since even before Inauguration Day. However, the industry’s attention reached a new level recently with the announcements of a series of tariffs on imported products from a variety of countries ranging from China to Canada. Yet, while a large emphasis has been put on how these tariffs will impact manufacturers from a strictly import-export perspective, there are many other intricacies and facets to the tariffs that could potentially impact manufacturers’ business operations.
As the details of tariffs continue to unfold, manufacturers should consider the following changes and the impact it could have on their performance:
The $200 billion China tariff impacts electronics
Much has been made recently over the future of what the trade relationship between China and the U.S. could look like with dueling tariffs in place – especially with the most recent $200 billion in tariffs placed on Chinese imports. This is obviously an eye watering figure and will have rather significant impacts on electronics and telecoms, in particular. However, while on the surface this may only seem to impact certain manufacturers, given electronics have become central to production, the repercussions of these tariffs will likely be felt throughout the industry.
From smart devices, such as wearable tech, to IoT sensors, electronics are engrained in the modern manufacturing supply chain. Meaning, purchasing replacement electronic components may ultimately become more expensive with these tariffs in place. Furthermore, expanding smart technology on the floor may need to be put on hold if acquisition costs become too high. Therefore, manufacturers will have to closely examine existing agreements, or even change partners so that they can keep their component costs under control.
Purchase price rising causes business shifts
The price of purchasing products has been a key focal point around the discussions in the tariff debate, with some analysts stating it could raise the purchase price of vehicles for U.S. consumers by more than $5,000. This could result is a massive shift in the way cars are purchased, with auto consumers moving away from car ownership and towards increasingly popular subscription services that leading automotive brands like Volvo, Porsche and several others are currently offering. However, this migration away from outright ownership is likely to expand beyond automotive as well.
Today, as more manufacturers look to evolve their businesses to meet customers’ evolving needs, many are shifting toward a service model that guarantees maximized product uptime. In this model, manufacturers sell access opposed to ownership and agree to proactively repair equipment before it ever fails. If the price of industrial machinery increases as a result of tariffs, for example, many manufacturing facilities may look at alternative ways of acquiring new equipment. If this is the case, original equipment manufacturers (OEMs) must have the technologies and business processes in place to meet these new customer demands.
International business implications
Under these tariffs, things could drastically change for international manufacturing organizations. And while much of the focus has been on the impacts to the bottom line, there is also going to be an incredibly heavy lift on businesses to optimize their existing business management processes across borders.
With so many moving parts and potentially vastly different implications on a country by country basis, manufacturing businesses really need to make sure that they have the strategies and tools in place to optimize their operations in each market. This will range from changes in distribution, to pricing, to data management. Recently, manufacturers have been getting progressively smarter in their operations, but these tariffs could necessitate rapid changes.
There are many moving parts surrounding Trump’s tariffs. Therefore, now is the time for manufacturers to look at each component of their businesses to see how they might be impacted and what can be done to keep things on track. The organizations that succeed will be the ones to invest in the right people, processes and technologies to ensure that no matter the circumstances, their business are equipped to constantly evolve and always meet customer expectations.