Time to get serious about trade, tariffs

President Donald Trump has followed through on threats to impose tariffs on imported goods, and the result is a dizzying array of higher levies. It's hard to keep up, and even more new tariffs seem to get proposed daily by the United States, China and other countries.

Increasingly, this trade war is looking like a boxing match, where the one getting hit is manufacturing.

Is your head spinning yet? Our best advice for manufacturing companies: Assign one person, or a team, to keep abreast of the fast-changing news and make regular reports to management. Someone to check the lists of products falling under the tariff — these are long lists and they're getting longer — and highlight key items that impact your company.

In the current environment, being the company's tariff guru could be a full-time job!

Yes, the media, including Plastics News, is covering what now is a full-blown trade war. But it's a major challenge to get your head around. Also, every manufacturing company has its unique angle on the tariffs — some are good; some are bad.

Processors should also talk to their machinery, mold and resin suppliers. Of special interest: How will tariffs impact work in progress in China, whether it be molds, machines or components that have not been delivered yet? Also to consider: How do you pass along higher prices and handle itemizing them in purchase agreements?

Here's a recap of the tariffs and trade disputes:

U.S. vs. China: On July 6, both countries slapped tariffs on goods from each other's countries. The United States hit China on $34 billion in products, and the Chinese retaliated right back with tariffs on that same amount. The United States' 25 percent tariffs mainly cover more than 800 Chinese industrial goods. Chinese-made injection molding machines, extruders, blow molding machines and thermoforming equipment are on the list. So are molds.

The 25 percent tariffs also include screws, hydraulic assemblies and other components for plastics and rubber machinery. Machine beds, bases and platens also fall under the tariff, which is potentially a major cost to injection molding press makers since most large castings are imported.

China's initial tariffs mainly cover agricultural products, which is why you're seeing news stories about plummeting soybean prices.

U.S. vs. China, take two: The resin sector has so far escaped the tariff battle. China is temporarily delaying tariffs on U.S.-made plastics materials. But about $3 billion in exports of U.S. plastic resin would be hit with 25 percent tariffs. That's causing a lot of worry in U.S. plastics resin makers. Both countries are holding additional tariffs of about $15 billion in reserve for an additional round of tariffs.

U.S. vs. China, take three: An even bigger whammy could be coming. On July 10, the Trump administration said it is looking at 10 percent tariffs on an additional $200 billion worth of imported Chinese goods. The new tariffs could directly impact consumer products, so regular shoppers could see prices go up. That's in contrast to the tariffs on machinery, molds, steel and aluminum, which will take time to pass through to consumers.

Steel and aluminum tariffs: Trump imposed import tariffs of 25 percent for steel and 10 percent for aluminum that started June 1. That will add costs for mold makers, machinery manufacturers and every industry that uses steel. For example, steel accounts for about 20-30 percent of the cost to make a mid-sized injection mold, industry sources said.

North American Free Trade Agreement: Efforts to renegotiate NAFTA began last year. They are still going on, and some observers leave open the possibility that the 24-year-old free trade deal would just go away.

Possible auto tariffs: The Trump administration is considering slapping 20 percent tariffs on automotive imports, both vehicles and auto parts. This could be the Big Kahuna, impacting the automotive industry that is so central to U.S. manufacturing, including the plastics industry, as well as the overall U.S. and world economies.

Combined with questions over NAFTA, this potential tariff is a real challenge to automakers and their suppliers in one of the most global of industries.

Here's the billion-dollar question: Are all these tariffs and trade deal moves part of an overall strategy by President Trump and his administration? Or is Trump shooting — and tweeting — from the hip?

Americans are hoping it is a grand plan. That Trump is doing the "Art of the Deal" on a world stage; playing hardball to get fair trade, renew American manufacturing, rejuvenate the U.S. steel and aluminum industries and get NATO countries to spend more on European military spending; and pushing China to buy more American goods and change its industrial policy that forces American companies to hand over intellectual property when they set up operations in China.

We think it's both — some strategy and some bluster. When it comes to tariffs and trade issues, there are too many Trump tweets and not enough detailed explanations. When will trade talks with China resume? What are the specific U.S. demands?

Nobody knows how long the tariffs are going to last. It's a big question mark. The U.S. economy is strong, and Trump's tax reforms and deregulation moves have helped withstand the trade battle. But once higher prices filter down to U.S. consumers, watch out.

Manufacturers are already feeling the impact of higher prices for steel and aluminum, but the full impact of the China tariffs is not yet clear.

The U.S. stock market is solid, and publicly held companies are reporting strong profits and sales. Let's hope that continues.

But the world has not seen this level of trade tensions in a long time. If the trade war keeps up, and even escalates, companies will may start moving production around. The United States could win more manufacturing, or lose it, as in the case of Harley Davidson.

We're in uncharted waters now. What the world needs now is more serious trade negotiations and less bombast.