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Tariffs return on China-made injection moulds

Tariffs on injection moulds from China will help US tool shops compete, but may hurt plastics processors, according to tooling analyst Laurie Harbour.

The US government's 25% tariff on injection moulds from China went back in place 28 Dec, following a lobbying campaign by the mould building industry. The office of US Trade Representative Robert Lighthizer appeared swayed by that effort, when it allowed a one-year exemption it had previously granted in December 2018 to expire as the year wound down.

The reinstatement of the tariff came after the American Mold Builders Association said in a 23 Dec news release it expected USTR to bring them back.

Harbour said US toolmakers will still face tough challenges, even with the resumption of the tariffs on Chinese moulds.

"It's definitely not a silver bullet that solves the problem, but it certainly contributes to making this closer to a level playing field," Harbour said in a 23 Dec interview. "It's not a complete level playing field, but it certainly moves it closer and it gives the US-based shops a better opportunity to compete.

In November, Harbour Results predicted that 50-75 mould and die shops in North America will close in the next five years, the result of declining spending on tooling from the auto sector.

The USTR decision comes after a lobbying campaign in recent months by the American Mold Builders Association.

"This is an important victory for AMBA, its members and all small downstream manufacturers who have felt the pressure from China for years," Kym Conis, executive director of Indianapolis-based AMBA, said in a statement. "The Trump administration is doing what others have not — standing up to China. It heard our members loud and clear — the US mould building industry has the capacity and expertise to fill any orders placed."

The tariffs were originally put in place in July 2018, in the first round of President Donald Trump's tariffs against China. But they were put on hold for one year in December 2018 after many injection moulders and other manufacturers complained that the tariffs would raise costs for US moulders.

Starting in October, however, the mould making industry mounted a vocal effort to bring back the tariffs. More than 150 mould makers filed comments to USTR urging that the tariffs return.

The mould makers said they have the capacity to handle more work and that US mould builders have been hurt by unfair Chinese trade practices.

Other US manufacturers disagreed with AMBA's position. Firms like packaging maker Berry Global Inc. and automotive moulder Forteq North America said US mould shops did not have enough capacity, and argued China's much larger mould shops were more price competitive. They said higher mould costs would hurt their bottom lines.

But AMBA countered that US mould making capacity utilisation stands at 75%, meaning that domestic tooling suppliers can meet demand.

Harbour said Chinese toolmakers added a huge amount of capacity as part of state planning to boost the mould making sector. The US tooling sector was hit hard by companies moving to Chinese moulds, and some closed down. So it's no surprise that US toolmakers did not invest in major capacity expansions, she said.

"What choice did these guys have?" Harbour said. "These guys have been under intense pressure for 20, 30 years. They've invested at the best they can invest under this unfair trade competition."

Harbour is president and CEO of Harbour Results in Southfield, Mich.

An executive with one company that had been opposing the tariffs, speaking anonymously because it was still assessing the situation, said its lawyers have told it the US government has decided to let the one-year exemption expire and reinstate the tariffs. The executive said the back and forth with the injection mould tariffs and larger trade talks between Washington and Beijing made it difficult to plan.

"The phase one [trade deal with China] is completed but what is phase two?" the executive said. "It is really difficult to make long term plans in this area."

Harbour said processors will see some negative impact, while US mould makers will get some help.

One issue for moulding companies could be if moulds are in China and are not scheduled for delivery until January or later, Harbour said. That could cost US moulders money, unless they negotiated that issue beforehand, she said.

Even with a 25% tariff, Chinese mould shops could still charge less than US shops on some jobs, according to Harbour.

"When you quote a US shop vs. a China shop, you may still see some China tools cheaper because they will quote based on their utilisation of capacity. If utilisation is low, they'll quote low to win the work. But US-based mould shops will have a much better chance of winning with these tariffs," Harbour said.

» Publication Date: 07/01/2020

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