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Tariffs on everyone's mind, but no strategy has emerged

Issue: August 2018

There is a lot of talk about tariffs. Even at NPE2018, the date of July 6 loomed large because that was the day the U.S. would begin imposing 25 percent duties on $34 billion of imports from China. In the months before the show, companies had begun anticipating the effects.

The imports include plastics machinery and equipment, so companies are scrambling to create strategies for the near- and long-term. Affected machinery includes injection molding machines; extruders; vacuum forming and other thermoforming machines; blow molding machines; bases, beds and platens; barrel screws; and unspecified “parts of machinery for working rubber or plastics or for the manufacture of products from these materials.”

Then, on July 11, President Donald Trump released a list of $200 billion in Chinese goods that are subject to 10 percent tariffs. That round of tariffs is scheduled to go into effect next month. China is retaliating, and so goes the trade war in tit-for-tat moves. China already has filed a complaint against the U.S. with the World Trade Organization.

Angie DeRosa, managing editor

Amid these moves, trade associations are having their say. The Plastics Industry Association (PLASTICS) has said that the tariffs endanger growth, and the National Association of Manufacturers (NAM) has said that the tariffs will hurt workers.

“This disruptive approach to trade policy endangers the gains that America’s $404 billion plastics industry has made as a result of this administration’s achievements on comprehensive tax and regulatory reform,” PLASTICS President and CEO Bill Carteaux said. “Tariffs threaten to boomerang on the very workers they’re supposed to help and will only undermine the confidence manufacturers need to make investments in new equipment, facilities and people.”

NAM President and CEO Jay Timmons also expressed concerns. “The last thing America’s manufacturing workers need is an escalating trade war,” he said. “America has China’s attention, so instead of more tariffs, the U.S. and China should immediately begin working toward a fair, bilateral, enforceable, rules-based trade agreement to end China’s market-distorting activities. We can’t afford to wait any longer.”

Overall, industry officials whom PMM contacted for this column reported that it is too early to assess the impact of the tariffs, but said that tariffs could alter the competitive landscape. It is anyone’s guess as to how that will play out. For each machinery maker, the impact of the tariffs depends on how and where the machinery and equipment components are sourced.

On a macro level, the biggest impact could be felt by companies that export machines to the U.S. and, of course, by the processors who buy those machines. According to Plastics Insight, those companies include Engel Austria GmbH with 706 machines; Japan Steel Works Ltd. at 568 machines; Arburg at 404 machines; Nissei Plastics Industrial Co. Ltd. with 391 machines; and Riyue Heavy Industry Co. Ltd., which had a reported 340 machines exported to the U.S. in 2016. Riyue’s website indicates that its product offerings include injection molding machinery components such as high-pressure oil cylinders, injection oil cylinders, stationary platens and moving platens. Haitian Huayuan Hong Kong Ltd. had 269 machines; Engel de Mexico SA de CV had 245; Ube Machinery Corp. had 224; Borch Machinery Co. Ltd. came in at No. 9, with 202 machines, and Ferromatik Milacron India Pvt. Ltd. had 201 machines. The data source for Plastics Insight is U.S. Customs and Border Protection. The full list can be accessed at www.plasticsinsight.com/worlds-top-10-companies-exporting-injection-molding-machines-united-states/

In terms of the more immediate impact to the industry, one official reported being able to pass on the 10 percent tariff directly to the end customer. Ten percent on a single component or piece of equipment is one thing; 25 percent on an injection molding machine is another.

Indeed, just as plastics machinery shipments are up 15.1 percent year-over-year in the first quarter of 2018, the hovering tariffs leave the industry in a state of confusion with no clear answers. This is the fourth consecutive quarterly year-over-year increase in plastics machinery shipments, according to PLASTICS. You can see the related news brief on Page 56 of this issue.

Rest assured, sorting out the impact will take time. There is a lot of talk in the industry now because people are struggling to make sense of it. Some injection molding machinery makers have responded by stocking up on presses stateside. That is a logical approach, but it generally only works for standard equipment.

Meantime, some suppliers have reported taking specific strategic steps, including Krauss-Maffei Corp. It’s owned by China National Chemical Corp. (ChemChina), which acquired it in 2016.

“We turned off the Chinese faucet in anticipation of this, as soon as we heard the impact of the tariffs,” Krauss-Maffei Corp. President Paul Caprio.

For Krauss-Maffei, the long-term result could be that European factories will deliver machines to the U.S. and Chinese plants will serve just China.

“No one is going to pay an additional 25 percent,” he said.

This is a particularly thorny, complicated topic for the industry, and we recognize that. We would like to hear your insights and opinions. You can email us at editorial@plasticsmachinerymagazine.com.

Angie DeRosa, managing editor