April 16, 2021
April 16, 2021
Tariffs and trade: How current policy is impacting industrial scale pricing, production and service.
In July, the U.S. imposed tariffs on a range of imported products, including scales, steel and aluminum. The tariffs have sparked a response from China, the European Union, Canada, Mexico and other trading partners.
For many scale manufacturers, tariffs have led to price increases, and industry analysts anticipate that tariffs will impact supply chains, product availability, and market demand.
Doran has announced that its prices are NOT increasing prices at this time their scales are built in the U.S. and not directly affected by tariffs.
For the industry, how have tariffs created challenges in terms of prices structures and supply chain?
Mark: Most imported scales are built in China, and the scales affected by the tariffs are in-motion scales, any scale with a capacity above 30 kg, scale parts and weights. All of these categories now have an additional 25% tariff, on top of the existing 2.9%. In some cases, this will have a great effect on common scale pricing — and some companies have already increased pricing with more to follow.
I am sure some manufacturers did not plan for these massive tariffs and will have a big check to write just to get products in transit into the country. That is where I would be worried about additional price increases as tariffs may have a large effect on some manufacturer’s bottom line.
How have tariffs impacted pricing of Doran scales?
Mark: In July, Doran announced that we are not increasing prices at this time. We can hold prices because our products are sourced and built in the U.S. so we are not directly affected by tariffs.
Today, our entire industrial line is manufactured in the U.S. and we source all of our stainless steel and metal from U.S. foundries. Our touch panels and circuit boards are from the Midwest, and everything else comes from local vendors.
However, we are keeping an eye on how tariffs affect demand for U.S. steel and aluminum, and we are concerned about the broader impact that tariffs and trade wars will have on the economy.
For Doran, why did you choose to source local products and manufacture in the U.S. rather than manufacturer overseas?
Mark: We made the transition to U.S. manufacturing before the trade war, and we did so as part of a strategic plan to ensure quality, increase reaction time to large orders, and reduce inventory levels.
Also, because of manufacture in the U.S., our entire industrial line qualifies as a NAFTA product, which reduces costs for our dealers in Canada and Mexico.
Doran products are designed, engineered and built in the USA. What does that mean for customers?
Mark: It’s a real positive for customers because it means that the product is manufactured in the U.S. and all — or virtually all — of the product is U.S. content, although components could be produced outside of the U.S.
By staying local, we have greater control over quality and can deliver value to the customer — value in terms of performance, reliability, and durability. That’s what will drive productivity and boost the bottom line.
What kind of concerns are you hearing from distributors and customers about tariffs affecting their business or their bottom line?
Mark: Our industry is primarily concerned that we’re facing a down year, and pressure to increase prices will further exacerbate the issue. Tariffs introduce a great deal of uncertainty and risk — for manufacturers, customers and the economy as a whole.
For the industry, do you think the impact of the tariffs will be short-term or may substantively change the way scales are manufactured?
Mark: Since NTEP and VCAP control the design of legal for trade scales, so I do not see much of a change there. I am sure some will try to reduce costs or avoid tariffs as much as possible. Playing games with U.S. Customs will delay orders and result in fines so I would be watching out for companies that may be considering that strategy.
When it comes to product design, we don’t even consider lowering quality standards of our industrial line. Product durability comes first and cost considerations are secondary. We look at connectivity, data collection software and operation of our indicators to provide as much ROI and value to our customers. The Internet of Things is a huge part of the value that Doran delivers and integrating that data into our customer’s current systems.
What is your advice for customers considering equipment purchases and wondering if it’s wise to buy now or see how trade negotiations play out?
Mark: I would be careful about providing quotes where pricing does not expire in 30 days. I would think that manufacturers would try to provide notice of price increases, but you never know. I would be more concerned about lower margin commodity items like floor scales or higher capacity bench scales. Thankfully Doran customers will not have this concern.
How would you compare tariffs to previous tariffs or policy disputes that created market disruptions and put pressures on price?
Mark: I always thought that the tariffs that existed in the past were foolish on the part of the US government. We had a 2.9% tariff on scale parts and components, but complete scales had no tariff. This encouraged complete manufacture in China and not in the US. This thinking may change in the future.
Until the dust settles between China and the U.S., we all need to plan for the worse possible outcome, which would be a long-term continuation of the tariffs.
In light of the tariffs, what’s your advice to customers who need to make a decision between investing in new equipment or maintaining current equipment?
Mark: If your scales are more than five years old, recent enhancements like network connectivity and data collection should be the primary consideration.
For Doran customers looking to purchase equipment, we believe there is a greater need for scales that offer quality, durability and value because they provide a faster ROI.
And for customers who want to extend the life of their equipment, we can provide great service to help maintain peak efficiency.