How Trump's protectionism affects EMS

»The USA needs Mexico and Asia«

29. Oktober 2018, 10:41 Uhr   |  Karin Zühlke

»The USA needs Mexico and Asia«
© Markt & Technik

Felix Timmermann, Asteelflash: »Customers who have, up until now, manufactured in Asia for the USA - now want to explore the Mexico alternative for themselves. But it is still too early to say whether this will have an impact, because so much is still vague.«

The USA is currently an incalculable factor for the world’s economy. The role played by Donald Trump's protective tariffs in manufacturing and their effect on production sites in the USA and Mexico were among the topics discussed at Markt&Technik‘s »Electronic Services« forum.

US President Trump aims to herald the renaissance of America as a production location and is therefore pursuing his rigid policy of tariff protection. It didn’t take long for the effects to be felt in the electronics industry. According to Johann Weber, CEO of Zollner Elektronik, Europe‘s largest electronics service provider, the protective duties on the electronic assemblies and modules that Zollner delivers from Europe or China to the USA have already had an impact: “Of course, 25 percent hurts. We discuss with our customers that we are not responsible for these extra costs, but these are difficult discussions,” Weber explains. Service providers are particularly hard hit by the problem, since they are left to bare the additional cost if the customer fails to show understanding. The already low margins in contract manufacturing can be quickly eroded.

Various materials used in the electronics industry are also on Trump‘s protective tariff list, and this means that customs duties may even have to be paid twice, as Weber explains based on an example: „Metal purchased in the EU, then sent to be specially treated in the USA and afterwards returned to Europe to be integrated here into systems that are then delivered to the USA market means that the protective tariff is applied twice, which is of course already critical”.

Markt & Technik
© Markt & Technik

Gerd Ohl, Limtronik »I don‘t find the US approach at all positive, because in the past it was long en vogue to relocate production from the USA to Mexico or Asia.«

Uncertainty is dangerous for the world economy

Is that what Trump had in mind? Stephan Baur, partner at BMK, says: “The conflict between the USA and China is being played out at the economic and technological level, the same way that wars used to be fought. Trump recognized this very well and has all the arrows in his quiver. China‘s increase in importance is irrefutable and the USA is fighting back; and like it or not we, as Europeans, are in the same boat in an intransparent way”.

And precisely this leads to negative effects. “The economy needs a certain level of security to make investment decisions,” emphasizes Dr. Peter Schmitt, Business Development Director of CCS. Even though CCS is not currently affected by the protective tariffs, because the company has little direct business with the USA. “But we can already see that our customers are increasingly unsettled by this.”

Markt & Technik
© Markt & Technik

Bernd Enser, Sanmina »The world economy has not had to deal with such political characters for the last 10 or 20 years. The economy was flourishing and politicians responded accordingly.«

According to Bernd Enser, Vice President Automotive Segment of Sanmina, one of the world‘s largest electronics service providers headquartered in the USA, uncertainty is currently the number one issue. “The world economy has not had to deal with such political characters for the last 10 or 20 years.The economy was flourishing and politicians responded accordingly.” According to Enser, this has now changed: „On the one hand Trump has to keep his election promises, and on the other hand he continues to try to act in the role of a business boss but in an environment with very different rules. The current situation is paralyzed, not by the fact that business is collapsing, but because the checklist of contingencies which companies now have to plan for is getting longer.

“In any case, we hope that the political water will not boil over. If we manage to stay in an area where despite a few bubbles the sea remains relatively calm, we will also get over this trend”. Is Trump‘s protectionism having any economic impact in the USA? “We are already seeing that domestic business in the USA is being boosted,” explains Enser.

The effects of Trump‘s policy on electronics manufacturers are still limited and the economy is booming, but there are still many question marks. The framework conditions can change from week to week if, for example, the situation between China and the USA worsens. “Working at a high run rate would make us all the more sensitive to a slowdown,” explains Ralf Hasler, Managing Director of Lacon. “If several customers were to cancel orders because the economic situation demands it, that would be extremely painful.”

Seite 1 von 2

1. »The USA needs Mexico and Asia«
2. Shortage of production workers in the USA

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Limtronik GmbH, BMK Group GmbH & Co. KG, Sanmina Europe, Zollner Elektronik AG