Tariffs can have positive and negative impacts on CNC machine shops. Imported materials, products and machinery used by the shop that carry a high tariff can have a negative impact. Conversely, high import tariffs on products produced by the shop can have a positive impact.
Impact to CNC Machine Shops
Tariffs on imported raw materials like steel and aluminum have a negative impact. The increased cost of these materials will cause the machine shop to raise its prices for finished components or absorb the increase and reduce profits.
At our shop, we use a lot of steel, aluminum and copper. We feel the impact of price changes due to tariffs, lead times and supply chain issues. We monitor prices and lead times closely.
On the other hand, import tariffs on finished components that the shop produces have a positive impact. The tariffs help the machine shop to be more price competitive with the foreign competition.
Tariffs applied by other countries on US produced goods have a negative impact on machine shops. The tariffs reduce imports by the other country which means exports from the US are reduced.
Basics of Tariffs
According to Investopedia, a tariff is a tax imposed by one country on the goods and services imported from another country. Governments use tariffs to protect domestic industries and to exert political leverage.
Raising tariffs generally make domestic production more price competitive for the domestic market. However, this protection may lead to decreased innovation and efficiency because companies come to depend on tariffs for protection.
Almost all countries have some level of tariffs. The tariffs can vary greatly depending on the country and type of product. The World Bank Group shows that average tariff rates have been falling since the year 2000.
Recent Examples of Tariffs
The US is raising the tariff on China-made EVs (Electric Vehicles) from 25% to 100%. It is thought that the Chinese government subsidizes its EV industry to the point that the companies don’t even need to be profitable. That is considered an unfair trade practice.
In 2021, the US decided to allow some steel and aluminum from the UK to be imported tariff free. Generally, steel has a 25% tariff and aluminum 10%.
Politics and the Economy
The nature of tariffs is a worldwide and complex system. There are positive and negative impacts. Governments can use tariffs to protect domestic industries. However, tariffs can increase prices of imported goods for consumers.
Related: NAFTA’s Impact to US Manufacturing Jobs
Most politicians want to stay in office. Countries battle for economic supremacy. Tariffs can have a great impact on countries, economies and industries. CNC machine shops have little control and must monitor and adapt to the changes.
About C&C Machine
We are a precision CNC machine shop located in Oklahoma. We’ve been producing quality products for over 40 years.
