The Electrical Industry’s Professional Recruiter

Tariffs and the Future of Manufacturing

At the Interwire Show, Karl Glassman, CEO & President of Leggett & Platt gave a presentation on the state of manufacturing. He credits his work to Dr. Chad Moutray, Chief Economist, National Association of Manufacturers. The findings were interesting as tariff policy increases.

The year over year growth in manufacturing production by sector shows that aerospace and other transportation equipment are growing by 7.9%, followed by computer and electronic production by 5.9%, then machinery grew 4.4 % (see Figure 1). Figure 1 shows the other sectors and their downturn or growth.

Figure 1

As we look at the Top 20 Exports for US goods, the UAE is at the top followed by Singapore, then the United Kingdom (see Figure 2). In the Electrical Industry, there are a few companies that export a large amount of business. I had conversations with Southwire’s rod division, where they are exporting to those areas as well as to China. The tariffs seem to be affecting the growth of exports, as we are not able to inexpensively ship goods to those countries.

Figure 2

Our largest trading partners are Mexico, which is responsible for $260.9 billion of US exports; and Canada which is $239.4 billion (see Figure 3). The next 11 countries combined equates to $496.5 billion, China only contributes a fifth of that remaining $496.5 billion. These exports support 2 million American manufacturing jobs and 43,000 small and medium-sized businesses. This was a large topic of the Interwire show due to misconceptions influenced by media reports.

Figure 3

After speaking with industry leaders, I found that companies were looking to move their Chinese factories to Vietnam, South America, Malaysia & Indonesia and/or Mexico. Manufacturers are working to partner with an array of countries to expand and create new manufacturing plants. In the connectors market, companies are expanding to Peru, Chile, and Puerto Rico to lessen their dependence on a single country (like China).

Companies have, also, been dealing with the tariffs differently. Some are not passing tariffs onto their customers because their profit margin can cover the loss; one company absorbed $15MM in a single quarter. Another owner explained how it has slowed his business and has to pass the additional costs onto the customer because he cannot financially absorb it. Leaders in Encore, Nexans, Southwire & Leoni found the new policies have helped their business because their products are made in the US. The wire and cable companies who seem most concerned are those who supply to white goods and OEM manufacturers, like lighting, because it will decrease consumer spending; in return, decreasing sales.

As more policies are implemented, it will continue to impact companies and their business strategy and the Electrical Industry.

 

Pati Kelly is a contingent and retained recruiter exclusive to the electrical industry with a specialty in Wire and Cable. To learn more about how she can help your company identify and attract talent, check out her biography, view her LinkedIn profile or send her an email at pk@egretconsulting.com.