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An Inside Look into Manufacturers' Thoughts on Tariffs

Posted by IndustrySelect on Monday, June 24, 2019

100015_mfg_executiveThe new U.S. tariffs on $200 billion worth of goods went into effect last year and both consumers and businesses are starting to feel the effects. Here's what manufacturers are saying:

- ArcelorMittal reported high profits after the implementation of tariffs.
- PPG Industries announced that the tariffs added a modest cost to raw materials.
- Sonoco projects as much as $9 million in tariff costs in the second half of the year.
- Covanta said that the tariffs helped raise its revenue forecast by $10 a ton.

Who are hard-hit?

But there's more. Have an even closer look at some of the most widely recognized companies and their examples, most reported negative impacts. In fact, out of these, 59 have stood forward. Only seven have shown a positive effect alone, and that should say everything.

Electrolux, for instance, is a Swedish vacuum company that has seen very terrible negative effects, growing only worse every year through the use of its tariffs, raw materials and currencies.

These approximately stand at $328 million. That was from this year alone and, before that, it was at $298 million.

Let's show another example, that of Stanley Black & Decker. This toolmaker company is set to raise prices on their products for all its consumers and hopefully trim more than $200 million in its operating expenses next year, facing recent increases of more than $40 million on quarterly costs. This forced the company to cut this year's earnings forecast by a fourth, even at the midpoint of the year.

Additional Examples

• Caterpillar, another prime example of this negative effect, has seen tumbled shares after warning of rising costs altogether. Even as a construction equipment maker, it is still struggling to survive in such a usually successful industry. The tariff impact was quoted at approximately $40 million as of the third quarter of this year, and the full year effect is yet to be noted. Many experts say it will be somewhere around $100 million to $200 million, respectively.

• Let's take the example of United Technologies as well, another hot one on the list. It currently expects a 5-cent share to finish off this year, offset by its own pricing increases, and then $0.15 in 2019. Those responsible for most of the impact are the factors of imported climate control and carbon monoxide detectors and other safety equipment.

• Harley-Davidson is another example on the list as its executives so recently said they hope to mitigate tariff impacts, which will cost the company more than $40 million this year already by its end.

• Polaris is there, too, a top motorcycle brand maker, one also responsible for snow machines. It needs to offset its own tariffs if it wants to continue in business. It apparently left its guidance unchanged at approximately $40 million in regard to 2018's tariff costs.

Final Word

Tariffs are a major threat to the gross margin target of many companies, not excluding the Tile Shop, of which these should also rise by at least a quarter at the beginning of 2019. The Tile Shop continues to struggle. But it is not alone.

The Latest Data on U.S. Manufacturers

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