UPDATED: Tariffs on injection molds from China will help U.S. tool shops compete, but may hurt plastics processors, according to tooling analyst Laurie Harbour.
The U.S. government's 25 percent tariff on injection molds from China went back in place Dec. 28, following a lobbying campaign by the mold building industry. The office of U.S. Trade Representative Robert Lighthizer appeared swayed by that effort, when it allowed a one-year exemption it had previously granted in December 2018 to expire as the year wound down.
The reinstatement of the tariff came after the American Mold Builders Association said in a Dec. 23 news release it expected USTR to bring them back.
Harbour said U.S. toolmakers will still face tough challenges, even with the resumption of the tariffs on Chinese molds.
"It's definitely not a silver bullet that solves the problem, but it certainly contributes to making this closer to a level playing field," Harbour said in a Dec. 23 interview. "It's not a complete level playing field, but it certainly moves it closer and it gives the U.S.-based shops a better opportunity to compete.
In November, Harbour Results predicted that 50-75 mold and die shops in North America will close in the next five years, the result of declining spending on tooling from the auto sector.
The USTR decision comes after a lobbying campaign in recent months by the American Mold Builders Association.
"This is an important victory for AMBA, its members and all small downstream manufacturers who have felt the pressure from China for years," Kym Conis, executive director of Indianapolis-based AMBA, said in a statement. "The Trump administration is doing what others have not — standing up to China. It heard our members loud and clear — the U.S. mold building industry has the capacity and expertise to fill any orders placed."
The tariffs were originally put in place in July 2018, in the first round of President Donald Trump's tariffs against China. But they were put on hold for one year in December 2018 after many injection molders and other manufacturers complained that the tariffs would raise costs for U.S. molders.
Starting in October, however, the mold making industry mounted a vocal effort to bring back the tariffs. More than 150 mold makers filed comments to USTR urging that the tariffs return.
The mold makers said they have the capacity to handle more work and that U.S. mold builders have been hurt by unfair Chinese trade practices.
Other U.S. manufacturers disagreed with AMBA's position. Firms like packaging maker Berry Global Inc. and automotive molder Forteq North America said U.S. mold shops did not have enough capacity, and argued China's much larger mold shops were more price competitive. They said higher mold costs would hurt their bottom lines.
But AMBA countered that U.S. mold making capacity utilization stands at 75 percent, meaning that domestic tooling suppliers can meet demand.
Harbour said Chinese toolmakers added a huge amount of capacity as part of state planning to boost the mold making sector. The U.S. tooling sector was hit hard by companies moving to Chinese molds, and some closed down. So it's no surprise that U.S. toolmakers did not invest in major capacity expansions, she said.
"What choice did these guys have?" Harbour said. "These guys have been under intense pressure for 20, 30 years. They've invested at the best they can invest under this unfair trade competition."
Harbour is president and CEO of Harbour Results in Southfield, Mich.
An executive with one company that had been opposing the tariffs, speaking anonymously because it was still assessing the situation, said its lawyers have told it the U.S. government has decided to let the one-year exemption expire and reinstate the tariffs. The executive said the back and forth with the injection mold tariffs and larger trade talks between Washington and Beijing made it difficult to plan.
"The phase one [trade deal with China] is completed but what is phase two?" the executive said. "It is really difficult to make long term plans in this area."
Harbour said processors will see some negative impact, while U.S. mold makers will get some help.
One issue for molding companies could be if molds are in China and are not scheduled for delivery until January or later, Harbour said. That could cost U.S. molders money, unless they negotiated that issue beforehand, she said.
Even with a 25 percent tariff, Chinese mold shops could still charge less than U.S. shops on some jobs, according to Harbour.
"When you quote a U.S. shop vs. a China shop, you may still see some China tools cheaper because they will quote based on their utilization of capacity. If utilization is low, they'll quote low to win the work. But U.S.-based mold shops will have a much better chance of winning with these tariffs," Harbour said.