Global Competitve Pressures

Goals

  • To find current information regarding the failure of US manufacturing companies to meet global competitive pressures.

Early Findings

Global Competitve Pressures

Tariffs
  • In August 2019, the direction of manufacturing growth in the U.S, specifically the US manufacturing PMI (purchasing managers index) equaled 49.1, falling below the neutral 50.0 threshold for the first time since September 2009. The index fell to 47.8 in September 2019, continuing that downward trajector, both causing and resulting in the weakest financial growth since the financial crisis the US faced in 2008.
  • The PMI Index, published by the Institute for Supply Management, fell to 47.2 in December 2019. Any time this index falls below 50.0, the industry or segment being referenced is considered to be contracting. December's number represented the fifth straight month of contraction.
  • The Trade War and resulting tariffs are one factor contributing to the failure of US manufacturing companies to meet global competitive pressures.
  • A study conducted by Federal Reserve economists Aaron Flaaen and Justin Pierce found that "the 2018 tariffs are associated with relative reductions in manufacturing employment and relative increases in producer prices" that are still affecting the US economy and hurting US manufacturer's ability to compete globally.
  • US tariffs have, in many instances, been met withRetaliatory retaliatory tariffs implemented by other countries. These tariffs raise input/import costs for US manufacturers, negating gains the US tariffs might otherwise bring.
  • Retaliatory tariffs result in US manufacturers spending more on necessary parts and production costs resulting in lower profits. Lower profits leave the manufacturers with less to invest in their workforce, in research & development, and in growing their companies.
  • The US and China have brokered an initial beginning trade deal that will provide some relief to some manufacturers and other businesses rocked by trade uncertainty but will leave the tariffs that have been put in place largely intact.
  • Tariffs, in general, are not considered part of a wise financial policy. The additional costs that result from tariffs and retaliatory tariffs slow manufacturing, raise prices for consumers who buy less and tend to make economies less efficient.
Automation
  • The US is falling behind in the development and use of industrial robots in manufacturing. China has taken delivery of more industrial robots than any other country since 2013 and shows no signs of slowing. In 2018, 39% of all industrial robots were put to use in China, a percentage that is expected to increase to 45% by 2021.

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