US toolmakers may have to wait for R&D tax, tariff changes

U.S. mold makers are holding tight through the end of a bumpy 2023 while waiting for a possible tax reform bill from the federal government.

"There's not too many customers that have had 12 out of 12 months of the last year be busy," Glenn Starkey, president of Wauconda, Ill.-based Progressive Components said during the Nov. 16 online Q4 Moldmaker Forum from the Plastics Industry Association. "Everybody's had a one-to-three month period that was under expectations."

Mold and machinery makers serving medical and packaging customers remain relatively steady in comparison with appliance and automotive, Starkey added.

According to the association's annual global trend report, the plastics trade industry saw its third consecutive negative trade balance, amounting to $7.4 billion.

The first half of 2023 brought the plastics industry a $1 billion trade surplus, Perc Pineda, the association's chief economist, said in a prerecording during the forum.

"The strong demand for plastic in the U.S. economy hasn't really changed," Pineda said. "The apparent consumption of plastics in all sectors, machinery, resin, molds, products all increased by … 13.7 percent. The apparent consumption of plastics products alone … increased by 18.2 percent.

Preliminary data, which could be subject to change or correction, for the period from January through September 2023, showed mold exports at $412.7 million, with imports at $1.6 billion.

Resin imports and exports generated a trade surplus of $20.5 billion, Pineda said, which is "more than enough to cover our $15.7 billion trade deficit in machinery products and molds."

"The three years of trade deficit … will come to an end if not this year, by next year," he said, "assuming that global economic conditions don't deteriorate further."

The association expects weaker economic growth in 2024 compared to 2023, Pineda added, due to continued inflation, high interest rates and high rates of debt.

The end-of-year quarterly forum updated members on efforts to repeal a provision in former President Donald Trump's 2017 tax cut plan that changed how companies deduct R&D expenses, turning a 100 percent deduction in the year money is spent into an amortized deduction spread over five years. It raised federal income taxes as much as 35 percent for some companies.

Meanwhile, issues like funding for Israel and Ukraine, U.S. border control, and the National Defense Authorization Act remain top of mind, Suzanne Morgan, senior director of government affairs at the Plastics Industry Association.

Congress' other focuses likely eliminate possibilities for an end-of the year tax package, Morgan said. "Congress has a lot to do … there's some big things on the table that will cost money."

Negotiations are continuing, she said. But those issues may kick a potential tax bill "into next year, which is better than nothing."

Discussion over an extension of the U.S. suspension of import tariffs on European Union steel and aluminum between the U.S. trade representative and the E.U. are "at an impasse," Morgan said, adding that tariffs could come back on in January if an agreement isn't reached.

The association sees no movement in the near future on China tariffs as the federal government holds on to them for leverage, she said.