How Will the Trade War Affect US Machinery and Equipment Vendors?

 

In the midst of the looming trade war between the US and China, there is considerable dispute over what the real impacts of the tariffs are likely to be. However, one thing is certain: Not all industries will be affected in the same way. In this post, we’ll take a look at what these tariffs mean for US machinery and equipment vendors in particular.

Standard economic theory holds that everyone loses in a trade war: Tariffs make goods more expensive, and therefore exporters will lose business. Indeed, there seems to be an acceptance on the US side that business will be lost, but Trump and his advisers argue that the US is sure to win in relative terms.

The US tariffs on 818 items from China, largely machinery and equipment, average 25 percent. What does this mean in a supply-chain context? And what does it mean for US vendors of machinery and equipment?

 

For certain machinery manufacturers, the positives could outweigh the negatives

On one hand, the steel and aluminum tariffs increase the cost to manufacture equipment. On the other hand, there are now US tariffs on Chinese machinery and equipment but no Chinese tariffs US machinery and equipment. China’s retaliatory tariffs are largely around consumer goods.

For example, the tariffs list covers injection molding machines, extruders, blow molding machines and thermoformers. While this isn’t great news for importers of Chinese-made plastics machinery or for companies that source substantial imported components, it could mean new machine sales opportunities for US-made machinery.

Many American companies have their supply chains built around Chinese machinery and equipment. Reducing Chinese vendors from these supply chains will take time and are likely to be costly for US machinery importers and various manufacturing businesses, and perhaps ultimately a bump in prices of final goods the US consumer. However, this is good news for domestic equipment and machinery vendors.

 

Is there a verdict? It depends on your supply chain

In the end, it all comes down to supply chain. For smaller US industrial companies without operations or partnerships in China, these tariffs are likely a positive. And for vendors who source components from China, the increase in components costs may be leveled in part by the tariffs on competing machinery from China.

If you're an equipment or machinery manufacturer who's looking to take advantages of new opportunities, we're here to help. Whether you're looking to start selling your equipment online or export to China, we can help you make it happen. Reach out to us through our contact page to learn more.