IPC Report Reveals Impact of Tariffs

Almost 90 percent of U.S. electronics manufacturers say they are concerned about the impacts of higher tariffs, such as those imposed over the past year by the United States and China on the goods imported from each other. Companies are working on a variety of strategies to cope with higher tariffs, including investing less in the United States and hiring fewer workers.
IPC surveyed its U.S. members on this issue between September 25 and October 2, 2019. Here are the highlights of what they told us.

• The overwhelming majority (86 percent) of U.S. electronics manufacturers are concerned about increased tariffs, and they face a steep financial burden from the tariffs that have been put in place. On average, companies report they have seen tariff increases on approximately 31 percent of the total dollar value of the products they import. Twenty-five percent of companies report over half of the dollar value of the products they import are facing higher tariffs.

• U.S. companies are investing less in the United States and hiring fewer workers as a result of higher tariffs. One in five companies (21 percent) report they are reducing investment in the United States. Roughly 13 percent of companies report they are cutting back on hiring and/or reducing headcount.

• Tariffs equate to higher costs for U.S. electronics manufacturers. Fifty-five percent of companies report they are facing higher prices as result of import tariffs. However, more than a third of companies report they cannot increase their prices to cover the cost of higher import tariffs, due to various factors.

• Tariffs are negatively impacting U.S. electronics manufacturers’ profitability. Some 69 percent of companies report lower profit margins as a result of increased tariffs. More than 80 percent of the companies that say they are reducing investment in the United States also report lower margins.

• U.S. electronics manufacturers are sourcing inputs from other countries and moving their businesses out of China as a result of increased tariffs. Fifty-one percent of responding companies report they are now sourcing from countries other than China as a result of increased tariffs on Chinese imports. Nearly one in five companies (19%) report they are moving manufacturing operations and potentially other business interests outside of China.

“The tariff situation is creating serious issues with our customers. If we were able to source parts locally or from other countries, it would at least be a solution, but China is by far the largest manufacturing country in the world, especially for components. As a result, all we are currently doing is adding cost to the whole process, and I am not even including the administrative challenges this has put upon us.” – Electronics Manufacturer

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