The headlines are filled with talk of a trade war between the US and several other countries including Canada, the European Union, Mexico and China. The US has levied tariffs on goods coming from these countries that will be sold in the US, and in turn these countries have levied equal tariffs on goods being exported out of the US.
Because this story probably won’t go away any time soon, let’s break down how these current and future actions are likely to impact your business.
Tariffs are a tax on imported goods and services. They essentially make it costlier and more difficult to import certain things, like metals, foodstuffs, consumer products, and so on. On the upside, that can be a major benefit to industries that produce those items, because it forces consumers to buy domestically. On the downside, this can also result in potential material availability issues due to domestic capacity constraints. If we think back to any economics classes we may have taken; as demand increases for a certain product, but supply stays about the same, it results in prices being driven up for that product.
The key tariff in play at the moment is the US-levied tariffs on steel and aluminum. This has increased demand for US steel and aluminum, and because US domestic supply has not yet ramped up, it is putting pressure on price. Because of this you have likely already seen the impact of rising prices when buying items such as Racks and Cabinets which are primarily based on these two materials.
Communications cables are not the first things that will come to mind when thinking of rising costs of steel and aluminum, but many CATV Coax cables use copper-cladded steel cores, and other copper, fiber and Ethernet cables use aluminum in the shielding, braiding and/or armoring components.
Additional tariffs of up to 25% have be placed on plastic molded parts which affects products such as wall plates, fiber and copper connectivity, and patch cords.
As this dispute deepens, retaliatory and secondary tariffs are expected to be levied which will place further pressure on domestic capacity and therefore overall prices will be on the rise across North America.
Not related to tariffs specifically, but also impacting our industry, is inflation. Raw material demand for PVC, as an example, has gone up year-over-year by 7%, driving up prices, as have other elements such as flame retardant materials, paper for packaging and freight.
At this point in time, you should expect that prices for products containing aluminum, steel and plastics will continue to see price increases to cover these added costs. It remains to be seen how much these tariff disputes will escalate, but you should be aware that many of the products in our industry could be further impacted as this continues. Even if products are manufactured in the US or North America, costs will be impacted due to raw material cost increases and capacity constraints domestically. All you can do for now is stay informed and plan your future projects accordingly.
Dwayne Crawford has more than 20 years of experience in the datacomm industry. He has served on several international standards committees to advance high-performance/low-latency protocols (such as IEEE-1394, GigE Vision and CameraLink) used in real-time image processing and utilizing high-performance computing platforms.