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Regulatory and Market Changes Impact Moldmaking

U.S. manufacturing will see significant impacts to the agriculture, aerospace and software industries because of the changing trade stance between America and it’s top trading partners including China, Canada and Mexico

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U.S. manufacturing will see significant impacts to the agriculture, aerospace and software industries because of the changing trade stance between America and its top trading partners including China, Canada and Mexico. While China is the largest trading partner with America, nearly 80 percent of that trade is imports from China[1]. In contrast, America’s exports to Canada, at nearly 49 percent of total U.S.-Canada trade, represents a dollar value that is 220 percent greater than America’s exports to China. The situation is similar with Mexico. Total U.S. exports to Mexico and Canada are over four times greater than to China. Conversely, U.S. imports from China equal over 80 percent of combined imports from Canada and Mexico to the U.S. Such asymmetrical trade flows can mean important things for any given business depending on a given firm’s reliance on foreign inputs to make finished good and reliance on foreign consumers to buy American-made products.

Manufacturing executives looking to adeptly navigate through the current trade environment should consider if their greatest exposure(s) is on the supply side or on the sales side of their business. For example, are most of your firm’s customers domestic while your supplies are imported? Or are your supplies domestically produced while your most significant consumers are foreign-based? Correctly answering this question will likely require learning more about your supplier’s supplier and your consumer’s consumer. In Gardner Intelligence’s consulting work with clients we find that a firm must have a strong understanding of their supply chain and revenue risks before determining how to use their limited resources to effectively and efficiently maintain and further grow a business.

Having a deep understanding of your supply network -which may include knowing your suppliers’ suppliers- are can be very important.  Our industry data has indicated that even significant expansion in supplier deliveries during 2018 was insufficient to keep up with new orders, resulting in the longest run in backlog growth in Gardner’s recorded history.  As a result, firms were turning away additional business. Secondly, many firms need to assess their revenue concentration by end-market. Many of the most successful manufacturers have been diversifying their clients list in order to reach more end-markets. Diversifying across end-markets can help mitigate the uncertain and uneven impacts from changes to trade regulations as well as help firms weather a downturn in any single industry. This type of risk management allows manufacturers to take advantage of a broader range of unforeseeable market opportunities while also hedging their exposure to any single unforeseeable market event. Many firms learned this lesson during the great recession and some even learned it twice when the oil prices drastically contracted during the second-half of 2014.

At the time at which this article when to press, the one clear message being expressed by the manufacturing industry is that many firms are taking a wait-and-see approach to the regulatory changes impacting the industry. As new rules are ratified, and companies adjust to new regulatory conditions, the most successful firms will be those that can identify any new competitive advantages, mitigate their weaknesses and reach out to potential customers who may be now scrambling for domestic business partners.

 

 

 

 

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