I do light manufacturing in Arizona. In the last six months the prices of steel have basically doubled. My #1 material input now costs twice as much, and to add insult to injury, it is now becoming very hard to get in some cases.
Last week we were scrambling to find 1/4 steel plate. A common common material. Its as rare as finding bread in a supermarket, its one of those staples that you never expect to see shortages of. And last week we had a lot of trouble getting it.
I had dinner with tubing salesperson this week. He was complaining that all the fancy DOM and high strength thin wall was in short supply - and this is where most of his commission based pay comes from. We don't use that much DOM, but we have noticed the price doubled this year.
Another friend sells a machine which uses hydraulic parts. He can get all the hose he wants, but nobody has any fittings. His suppliers of hydraulic cylinders are all out of stock and not expecting shipments until November. One supplier told him that he laid off his whole staff since there was nothing to sell and he wasn't sure if he could cover rent let alone employees until November.
The tariffs have caused a two-fold reaction; industrial customers with money in the bank have purchased 6 months or a year worth of stuff instead of a months worth of stuff, while suppliers offshore have stopped shipping because they don't know what the price will be by the time it arrives in port. Since the deal is struck before the ship leaves, what happens if a 25% tariff is added? So they ship nothing and wait.
The actual tariff itself is not the main issue, it is the market forces reaction to it. No USA based suppliers can pick up the slack, and nobody I knew of was hedged against a sudden tariff being applied to their main inputs.
Blue collar workers will get laid off and the effects will ripple through the economy. This crash will be different from the last, but that doesn't mean it won't happen.
I have no strategy other than avoiding new spending on machines and being very slow to add new hires. Your industry segment may vary tremendously, time will tell.
I am moving to a new factory this month, my electrician is harvesting all the conduit and panels, because they have gone up 130% this year he tells me. I am in fear of the invoice.
Last week we were scrambling to find 1/4 steel plate. A common common material. Its as rare as finding bread in a supermarket, its one of those staples that you never expect to see shortages of. And last week we had a lot of trouble getting it.
I had dinner with tubing salesperson this week. He was complaining that all the fancy DOM and high strength thin wall was in short supply - and this is where most of his commission based pay comes from. We don't use that much DOM, but we have noticed the price doubled this year.
Another friend sells a machine which uses hydraulic parts. He can get all the hose he wants, but nobody has any fittings. His suppliers of hydraulic cylinders are all out of stock and not expecting shipments until November. One supplier told him that he laid off his whole staff since there was nothing to sell and he wasn't sure if he could cover rent let alone employees until November.
The tariffs have caused a two-fold reaction; industrial customers with money in the bank have purchased 6 months or a year worth of stuff instead of a months worth of stuff, while suppliers offshore have stopped shipping because they don't know what the price will be by the time it arrives in port. Since the deal is struck before the ship leaves, what happens if a 25% tariff is added? So they ship nothing and wait.
The actual tariff itself is not the main issue, it is the market forces reaction to it. No USA based suppliers can pick up the slack, and nobody I knew of was hedged against a sudden tariff being applied to their main inputs.
Blue collar workers will get laid off and the effects will ripple through the economy. This crash will be different from the last, but that doesn't mean it won't happen.
I have no strategy other than avoiding new spending on machines and being very slow to add new hires. Your industry segment may vary tremendously, time will tell.
I am moving to a new factory this month, my electrician is harvesting all the conduit and panels, because they have gone up 130% this year he tells me. I am in fear of the invoice.