Here is my little rant to start 2017. My thoughts are from the Canadian perspective and the fastener import business.
So by now Trump is the new US president and many outside the US are wondering and are probably a little worried what will happen next. For me it is a bit of a strange feeling because I am here so often and have good friends and colleagues here and do business in the US, so I do feel somewhat invested. The word from the new administration is that NAFTA is going to be ripped apart and while the main target may be Mexico we know that the Canadian trade relationship will also change. Canada is currently the biggest export customer of the US and we will see what happens on that front.
What about the fastener industry? From early indications the new administration may target China as the main culprit for all things bad in importing, so can we now expect large duties on fastener products from China? At this point China is not the lowest cost country anymore as their local costs are increasing and many companies focus much more on the domestic market. Small factories are forced to close because they cannot comply with the new environmental regulations. Prices are already going up and the low end makers are already moving production to other countries with better costs structures. It will be hard to target one country.
Hypothetically say an extra 40% duty was added on imports, would that significantly help US manufacturing? In some areas absolutely, however I suggest that the lower priced commodity parts would still not be commercially viable even with a duty. I believe the price to the end user would increase significantly as the new costs have to be passed on. So the question is will the increase of manufacturing activity balance out against a 40% increase in costs of hardware in this scenario? I suggest the pain is not worth the gain. Also, how will China react when the US market start to apply protective measures. Certainly China will mirror all taxes and duties that the US imposes for imports and launch into a media campaign against US made goods. I remember how sales of all things Japanese simply stopped a couple of years ago in China with the “Island controversy”. US car makers produce thousands of units in China for the local market and the “made in USA” brand will certainly take a beating. I do not know how much business is done by American corporations in China but I expect it to be a significant number. The good thing is, there are people much smarter than me that get to figure this stuff out.
So we will see what happens, but I suggest that all the simple solutions that were bantered about over the last few months are not as simple as advertised.
I honestly want the best for the new administration. A strong US economy is good for Canada.
Hans Fuller
@hansfuller