Looking Back at Trump’s Trade War: Did it Help Manufacturing?

Manufacturing headlines in 2019 were dominated by one continuous topic of conversation: President Trump’s trade war with China. The saga started in June 2018 and deescalated in January 2020, with no formal resolution yet signed. The U.S. and China went back and forth, exchanging tariffs on imported goods to find leverage and exert economic will. Then, the COVID-19 pandemic struck, and the trade war fell off the front-page news. What happened and how did manufacturing ultimately fare?

A quick recap of the trade war

The nuances of the trade war with China are numerous and far too many to list here. However, a quick recap of the bigger blows is enough to put the intensity of the trade war into perspective, to show how manufacturing was affected.

  • July 2018: U.S. and China exchange tariffs of $34 billion each.
  • August 2018: Another round of tariffs exchanged at $16 billion each.
  • September 2018: U.S. imposes tariffs on $200 billion worth of goods; China fires back with $60 billion, both at 10%.
  • May 2019: The U.S. escalates again, imposing an additional tariff on $200 billion at 25%.
  • June 2019: China responds with tariffs of $60 billion at 25%.

Tensions continued through 2019. Among the items subject to tariffs were raw materials (aluminum, steel, ores), minerals and fuels, inorganic compounds, and plastics — all conducive to manufacturing operations.

How did manufacturing fare?

In a word, poorly. Massive tariffs on imported raw materials and exported finished goods hit the manufacturing sector hard. Nervous sentiment and contingency planning were common themes among industry voices in monthly ISM reports throughout 2018 and 2019, and general disdain for the protracted trade war wasn’t a secret.

Manufacturing was hit especially hard not only because of the tariffs, but because of the fallout from these higher costs. Producers faced three options: eat the costs, pass them on to customers, or pivot supply chains. Most chose the first option.

The Federal Reserve also has produced a report attributing higher manufacturing unemployment to the trade war. Where did those jobs go? Many signs point to other countries where manufacturing labor is cheaper and more accessible — namely Vietnam and Cambodia, as well as South American countries.

Is it all bad news?

No! Although manufacturing received the short end of the stick in the Trump trade wars, there is optimism for long-term benefits. Domestic manufacturing saw a spike before COVID-19 and there’s hope that it will continue to thrive post-pandemic. Chinese commitments to purchase more U.S.-made products were stipulated in the tentative agreement signed by both countries in January 2020, and China has already begun to follow up on those promises.

Tensions still persist

Will the trade war rekindle in the future? It’s hard to tell. There’s still significant tension between the U.S. and China, with subtle jabs still occurring between the two leaders. Combined with the lack of a formal end to the trade war and what’s bound to be a turbulent election season, it’s possible trade tensions flare up again as economies jockey for leverage post-COVID-19.

Both the trade war and the pandemic have hit manufacturing hard. It’s important to look for silver linings where we can find them, because a dark cloud still looms above.

For manufacturers impacted by the trade war, cost savings and reliability have become focuses. For many, this has meant exploring the benefits of third-party maintenance partnerships. You can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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