Tariffs Give Cause for Concern in Texas Manufacturing

Tariffs Give Cause for Concern in Texas Manufacturing

If you were to thumb through some accounts of how tariffs are impacting the Texas economy, many would point to continued expansion and growth. According to the Texas Manufacturing Outlook Survey for June of this year, it would appear that Texas factory activity continued to expand and the production index went from 6.3 to 8.9. The increase marks favorable manufacturing conditions, yet the survey also indicated a significant drop in general business activity and positive company outlook. In fact, the company outlook index fell from –1.7 to –5.5, marking a new three-year low. The uncertainty index rose to 21.6, the highest it’s ever been since the metric was added to the survey in early 2018.

According to Emily Kerr, senior business economist at the Federal Reserve Bank of Dallas, “Tariffs are certainly a factor that’s driving up uncertainty and now we have explicit proof of that.”

What impact could we expect this uncertainty to have? Any uncertainty could lead to decreased customer demand, project delays and a sharp tightening of spending budgets, with fears of ultimately hitting manufacturing employment numbers square in the jaw.

While overall unemployment numbers are looking good, manufacturing employment fell 0.7 percent in May. Let’s take a look at what 115 Texas manufacturers had to say about the impact of U.S. and foreign tariffs.

  • 45 percent said tariffs aren’t affecting them
  • 41 percent said tariffs are already hurting their bottom line
  • 32 percent said they expect negative long-term impact
  • 30 percent said future costs are unclear
  • 21 percent said they don’t expect an impact
  • 18 percent said tariffs will give them a boost

Of those who answered “negative” to Current 2019 impacts, 54 percent reported passing those additional costs onto customers. Other answers included finding new domestic suppliers (17%) or bringing production or process back in-house (17%).

After digesting all those facts and figures, what does the future of manufacturing hold for Texas? Regardless of the actual impact tariffs are having on local manufacturers, the consensus appears to lean toward increased caution in the future regarding hiring, expansion and various expenditures.

What do you expect in the longer term and how will you prepare for the future? Let us know in the comments below. And, as always, if you need help finding the cutting tools and products you need for better productivity and profitability, contact us today. The pros here at M&M Sales & Equipment are happy to help.

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