The burden of globalism imposed on U.S. manufacturing requires an awareness of the value of the dollar.
The U.S. government is running an annual deficit of $500 billion. The shortfall is filled in by borrowing money from other countries in the form of treasury bills and other securities. Add to that an annual trade deficit of $500 billion, which is paid for in dollars and ends up in foreign banks and U.S. securities. That's a trillion dollars a year going overseas. The United States is becoming insolvent and the world is taking notice.
The United States is pressing China to devalue the renminbi, but China cannot move too quickly. China's trade balance is about break-even, but that includes an annual surplus of $100 billion per year with the United States. An exchange-rate change could affect trade with the United States, since the cost of exported goods would rise. Secondly, an abrupt change would devalue the $609 billion the Chinese are holding. The telltale sign is the effort Beijing and others are making to create a mixed basket of securities and minimize their U.S. dollar holdings. To head off the stampede, Green-span will continue to increase the prime rate.
Countries with a market-determined exchange rate that were competing with China for the U.S. market are taking a beating. Thus, for the short term, the undervalued dollar is destroying some of China's rivals. China is becoming totally dominant in the production of textiles and clothing.
The bottom line is no immediate change, but eventually you can expect about a 10 percent rise in the cost of “Made in China” products. Some work may drift back to the United States. At the same time, expect to see the cost of mold parts rise, since most are made outside of the United States.
In summary, business volume for mold makers will continue to improve slightly for 2005, but the pressure on mold prices will continue to be relentless. At the same time, the cost of steel and mold components will continue to increase and squeeze out most of the profit. Don't hesitate to shop. Unfortunately, few discounts are offered to the small and medium-size mold shops, which make up the bulk of the industry.