Uncertainty and pressure are weighing heavily on the U.S. mold making industry with 25 percent tariffs on all imported steel and aluminum scheduled to go into effect March 12.
The U.S. imports about a quarter of the steel and half the aluminum it uses so an immediate inflationary effect is expected.
Members of the American Mold Builders Association (AMBA) attended an “urgent” online webinar Feb. 14 for an update about the impacts they face.
“We continue to monitor the dynamics of the rapidly changing tariff situation,” AMBA Managing Director Kym Conis said in an email.
AMBA also is watching a 25 percent tariff on products from Canada and Mexico that has been put on pause.
“If it comes back, the tariff on Canadian tools will be significant. A lot of molds come out of Canada and less and less out of the U.S.,” Laurie Harbour, a partner at Wiplfli LLP, said in a phone interview.
Durable steel molds are used for high-volume production while faster-to-machine aluminum molds are more affordable and suited for prototyping and low-volume production.
The molds shape raw materials into plastic products and they’re already a significant production investment for manufacturers.
Maybe in a few weeks manufacturers will be paying tariff costs, too.
Somebody will have to pay. It could be the mold makers for starters but then it’s likely to be punted to manufacturers and finally the end user, Harbour said.
“If tools come from Canada to the U.S. with an extra tariff on them, that’s going to get passed on to the consumer,” Harbour said.
In the meantime, there has been a lot of activity between Canadian and U.S. companies.
“Weeks before those tariffs were supposed to go into place, a lot of Canadian toolmakers moved tools to the U.S. They weren’t even done. They were fearing that tariff. If it’s a $100,000 tool, you’re looking at an extra $25,000 cost. That’s a lot of money.”
Canadian toolmakers called on partners or made arrangements at plants they have in the U.S.
Harbour said she’s concerned for mold makers serving the automotive industry and any businesses with a sale in progress.
“We get a lot of automotive tools out of Canada. If that tariff comes back, that’s going to have a huge impact on the capital cost for tool making,” Harbour said.
Another tariff on tools sourced from China could create payment issues as those tools come over.
“Now all of a sudden the tool has a new 10 percent tariff that nobody quoted. So now it’s a standoff,” Harbour said. “Who’s paying that? The tool maker will say I’m not paying for something that happened after the sale. The customer will say I’m not paying for something I wasn’t quoted. But somebody is going to have to pay. That’s likely to be the toolmaker in the beginning.”
At some point Harbour expects the Chinese will subsidize the 10 percent tariff costs like they did with the 25 percent 301 tariffs.
“They just dropped their price 25 percent. They’re going to keep doing that. They’re not going to give up that business,” she said. “So, a 35 percent tariff isn’t necessarily going to have that big of an impact. The Chinese will just drop their price more.”
Harbour’s broad concern about tariffs is pressure added to the post-COVID business environment.
“Since COVID, the costs for manufacturing goods have gone up substantially and inflationary prices are squeezing margin out of molders and mold makers and it’s not just the plastics industry but any. Manufacturers are seeing compression in their margins.”
If costs rise to the consumer, and the sale of goods slow down, that’s going to impact manufacturers at the top line and then ultimately compresses their margin even more, Harbour said.
“Keep in mind our tool industry is really slow right now. This will hurt some Canadian toolmakers even further. They’re already struggling because demand for new tools, particularly in automotive is way, way down as companies rethink their battery electric vehicle strategy. Ultimately, tariffs will continue to put uncertainty and pressure on these companies.”
Brace for upheaval
All kinds of scenarios could play out, according to Plastics News Economist Bill Wood.
A good assumption is that if imported steel prices go up, the price of molds made from that steel will go up by about the same amount.
“The idea behind tariffs has always been to promote domestic manufacturing. That’s why the U.S. and other countries do it. Tariffs usually make imported products less competitive. Somebody has to pay the price of those tariffs and usually it gets passed along,” Wood said.
He gave an example of a U.S. mold maker using steel imported from Canada. The steel supplier/maker’s price will go up because of the tariff. If the steel maker passes it along, maybe the mold maker simply does, too.
Or, maybe the mold maker pays the higher price for Canadian steel and finds other ways to trim expenses without passing the tariff along. Maybe the company has some wiggle room in other parts of the budget.
“It could just come down to a lot of pencil sharpening,” Wood said.
Or, maybe the mold maker finds a domestic source of steel.
With tariffs enacted, however, domestic steel won’t always mean much-cheaper steel than imports. The domestic steel maker will be able to raise prices and still come in under the non-domestic steel makers.
Or, maybe the tariffs and higher prices that have to be absorbed somewhere will be too much. Maybe the mold maker will find it harder to compete and close as a result.
“I don’t know how this is going to work,” Wood said. “The problem is finding out where the supply and demand equilibrium is. It will take time and there will likely be some upheaval. Maybe in the long run it’s a good idea. According to Trump, tariffs are going to help certain businesses more than they hurt other ones.”
Still, Wood expects mold makers to be among those hurt.
“They’re never really in a good position. They have to be like 17-year cicadas. They have to lay in the weeds when it’s bad. Then, all of a sudden it’s a great day for surfing. The mold makers go out there and do it right. When it’s good, it’s good and everyone is busy and charging fair prices. But most of the time, it’s a tough time to be a mold maker.”
Tracking tariffs
The mold-making industry has benefitted from tariffs, particularly the Section 301 trade action.
Last May, AMBA not only applauded a decision to maintain a 25 percent tariff on China-made molds, tools and dies enacted in 2019, but called for the rate to double.
Those tariffs don’t make AMBA’s 200 member companies whole but they do help them compete.
“American mold builders have the capacity, technical expertise and ability to deliver any molds ordered and we can attest that U.S. mold and die manufacturers stand ready to fill orders and put more Americans to work,” Conis said last May.
The exact number of U.S. mold manufacturing operations isn’t known but is estimated to be between 800 and 1,000 companies.
Some manufacturers, on the other hand, have called for the federal government to rescind those tariffs. Companies like power tool maker Stanley Black & Decker Inc. and powersports vehicle maker Polaris Inc. have argued tariffs make their U.S. factories less competitive because they raise the price of manufacturing inputs.
Now everyone is following the latest slew of tariffs.
On Feb. 1, the White House announced a 25 percent tariff on all imports from Mexico and Canada and a 10 percent tariff on energy imports from Canada.
Another 10 percent Chinese tariff was schedule to go into effect Feb. 4 while the ones for Canada and Mexico were paused and may start March 4.
The policy goal is to deal with the “extraordinary threat posed by illegal aliens and drugs, including deadly fentanyl” that constitutes a national emergency, according to the White House.
Then came the announcement of 232 Tariffs for all countries on steel and aluminum starting March 12. The policy goal is to stop imports that threaten to impair national security.
Domestic production
President Donald Trump wants U.S. exports to exceed imports, and it is possible in some cases, according to Michael Feuz, an economic consultant at Manchester, N.H.-based ITR Economics.
“We could replace the imports domestically but that’s going to take a lot of capacity expansion,” Feuz said in a phone interview. “The risk will be investors might be hesitant to invest in expanding capacity for steel and aluminum production. If these tariffs get pulled back in four years by the next president, will that production suddenly be exposed to international competition?”
A good way to shore up domestic production is to encourage innovation to gain competitive edges.
“Make those efficiency gains that allow you to beat the competition whether its domestic or international,” Feuz said. “Tariffs can lull businesses to sleep. If you’re benefiting from tariffs, you may pull back on your innovation because you’re benefiting from artificial protection. You need to really be intentional about still investing in your efficiencies and innovating where you can for a clear competitive advantage beyond the tariff policy.”
Some companies will proactively raise prices and use tariffs as an excuse. Mold makers should be among them, Feuz said.
“Taking advantage of 2025 to pass on those costs will be a key strategic initiative mold businesses should lean into,” he said. “There’ll be an opportunity for businesses impacted by tariffs to be able to raise prices without as much pushback.”
ITR’s outlook is for a growing economy in 2025 and 2026.
“As we get towards the middle of the year, in June, you’ll get this coalescing of higher demands, lower inflation, and the stabilization of interest rates. We’re going to have to kind of settle into the new normal of interest rates and forget about the past decade,” Feuz said. “Then, I think those three things together will combine to help drive a lot of positive sentiment among businesses.”