Every day, the news about tariffs fills the headlines. India retaliates against the perceived slight. China continues on its way, while American manufacturers beg the powers that be to reconsider tariffs on our North American neighbors in Canada and Mexico. When speaking to investors, Forbes dubbed the recent happenings as “Tariff Mania” and offered a survival guide.
In the midst of the tariff saga, we reached out to a few more colleagues from the electronic manufacturing services world to see what they think, and what they are hearing from customers about this complex and thorny issue. We spoke with Manfred Amberger, director of marketing and sales for Zollner Elektronik AG and Brad Heath, chief executive officer of VirTex.
EBN: Following the addition of a 5% tariff on imports to the US from Mexico, how much impact do you see on the electronic manufacturing supply chain?
Heath: The largest impact will be an increased or continued uncertainty on the stability of the global supply chain. Manufacturers need to be able to plan where they will buy parts and what they will cost. Lead time impacts around disruptions like this can be felt for many years to come.
Amberger: This could surely have an influence on certain products and/or sourcing decisions. For some products, the sourcing may be shifted from Mexico to a different location. The tariff might also jeopardize the competitiveness of current builds.
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?
Heath: It has become increasingly difficult for our customers to establish what their true cost of acquisition will be. Increases in freight, tariffs, qualification, and other switching costs and similar unforeseen pass through expenses either impact the manufacturers’ margins, or are a direct cost impact to the consumer.
Amberger: Tariffs have considerable impact on every supply chain and sourcing decisions in general. It is not easy to foresee those unintentional consequences immediately and even getting a clear picture is not always possible – this results in uncertainty for us and our customers.
EBN: What is the response of your clients to this issue and how can you protect them against the complexities of ever changing international trade challenges?
Heath: Customers who were previously considering moving work to Mexico from China are now considering other low cost regions like Vietnam. This is the type of thing that can just snowball if not controlled. The global supply chain is highly interdependent, and relies heavily on the U.S., China, and Mexico. Anything that disrupts this, ripples throughout the supply chain in ways that are clearly not fully understood by the President and Congress when approving these tariffs. The eventual removal of these tariffs may continue to disrupt the supply chain and create cost impacts for years to come.
Amberger: In the end, we all need to deal with those changes continuously. It is hard to protect clients against those complexities as those are unforeseen. We need to provide options in terms of locations and supply chains to mitigate as much as possible.