You’d think the one group that might be happy about President’s Trump’s tariff bombardment would be U.S. manufacturers. Well, not exactly.
Some of the nation’s largest manufacturing groups aren’t so sure that these new measures will be as beneficial as Trump says they will be, and are up in arms over the risking costs of raw materials that they get from overseas. As Jay Timmons, president and CEO of the National Association of Manufacturers (NAM), the largest manufacturing association in the United States told CNBC yesterday, business owners are “bracing” for the negative impact of rising material costs.
“We don’t know what the actual proposal is going to be, or the actual plan is going to be from the president today, but in any scenario, it’s going to add cost to manufacturers, especially for those inputs that are coming into the United States for finished goods and already finished products,” he said.
Trade uncertainties are now at the top of manufacturers’ concerns with about 76% saying proposed tariffs and shifting negotiations as their top business challenge and followed by increased raw material costs at 62%, a survey published in March from NAM found. And on average, they expect costs to rise 5.5% due to these tariffs. And while hypothetically, Timmons says, the move does bring business back to the U.S., in reality, making raw materials more expensive could lead companies to fail in the long term.
“I think it’s pretty safe to say that everybody would like more things made here in this country, because that’s good for the economy. That’s good for jobs. What is not good, though, is driving up the cost of actually making those things here in the United States.”
Economists seem to agree with Timmons, noting that given the cost of labor overseas, it’s unlikely that companies will bring jobs back to the U.S. when they can find it cheaper elsewhere. “This is not going to succeed at reviving U.S. manufacturing,” Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative think tank, previously told USA Today.
Some states, such as New York, are already facing the impact, according to the New York Federal Reserve Bank’s March manufacturing index. Optimism is down, new orders and shipments are declining, and input prices are skyrocketing.
“Manufacturing activity dropped significantly in New York State in March,” Richard Deitz, economic research advisor at the New York Fed, wrote in the survey. “Input price increases climbed for a third straight month to hit their fastest pace in more than two years. In addition, supply availability is expected to contract and firms continue to grow less optimistic about the future business outlook.”
Some companies, like automotive companies, are already downsizing due to President Trump’s levies. On Thursday, Stellantis announced that it’s temporarily laying off 900 workers at five different facilities in the U.S. as a direct result of Trump’s tariffs on Mexico and Canada, Reuters reports.
There is a way forward, Timmons says, but it’s going to require some help from the government he notes. This includes minimizing costs for manufacturers that are growing in the U.S. and ensuring certain critical inputs will be free of tariffs. Negotiating for some “zero-for-zero” deals, in which manufacturers strike a deal with trading partners so that neither entity charges the other. These kinds of measures, he notes, would help manufacturers determine the kinds of levies that work for their businesses.
