Two takes on tariffs
It seems like every business conversation I have these days is somehow connected to tariffs. Whether it’s our customers, colleagues or our competitors, the current tariffs, and the looming 25% surcharge at the end of the year, are having a huge impact on the caster business. Many of the people I speak to are frustrated and see the tariffs as a kind of destructive doomsday. While I hear them and sympathize, there are clearly two sides to the tariff situation.
Let’s back up a step. Earlier this year, President Trump imposed a 10% tariff on imported goods from China including steel, casters and caster components. Subsequently he announced plans to increase those tariffs to 25% on January 1- and that’s what’s really got the industry in an uproar.
Importers are scrambling to get product landed by the end of the year. That means they are behind on completing orders. With transit time from the China of at least four weeks, we are about a month away from last day to produce goods that can be sold at the pre-tariff cost. That’s causing chaos. Beyond that, they must re-conceive post 2018 business models that will see a huge portion of their bottom line stripped away.
Suppliers that both import from overseas and manufacture in the U.S. are working furiously to re-align their operations and quickly increase their on-shore production capacity. That’s kind of like turning a cruise liner. It doesn’t happen fast and they are not able to respond to the demand. In addition, I hear that some manufacturers are having trouble finding qualified staff to support the intended production increases.
Distributors may no longer have stable supply chains. Their vendors are raising prices and restricting delivery. That’s not a good combination. Fabricators who use casters as part of a finished product are in an even more tenuous position. They have quoted and provided delivery dates on goods but with the chaos in the caster market, are at risk of being late and above budget. That’s also not a good combination.
While all of this is playing havoc with the industry and there will certainly be companies that become casualties, there is a clear upside to the situation. For years, the reshoring movement struggled to convince companies to bring manufacturing back to North America. But the unbelievably low prices on imported goods were irresistible to a competitive marketplace where small differences in price accounted for huge differences in sales and profit. The tariffs will do what moral and patriotic arguments could not. When the storm subsides, there will be more casters being manufactured in North America, which means more jobs, more investment and more growth. There will be lots of short term pain but it’s very possible – maybe even likely – that it will be overshadowed by the long term gain.
For us at Algood, there is a bit of a boon in all this. Our products are not subject to tariffs and we have a fully integrated manufacturing facility in Toronto. We can deliver product that meets very specific requirements at competitive prices and in very favourable timelines. That is making us an attractive option for distributors and fabricators. We’re getting new business and we’re not complaining.
It’s distressing to me when I talk to our distributors and other customers who feel trapped by the current state of affairs. As a business owner, I empathize with their frustration and deep concern for their businesses. Unquestionably this is a situation that sucks for many companies and many employees. I feel their pain.
And then there’s the other side. That’s the real possibility that all this will lead to a renewed, healthy and vibrant North American manufacturing sector and increased demand for casters and wheels produced on-shore.
I guess there really are two sides to the tariff tale.