Sep
21

US/China Tariffs Having an Effect on the Hydraulics Industry Print

If you have listened to the news, or perhaps checked Twitter, you may have heard of a ‘trade war’ between the US and China (along with some of the US’s allies). This was initiated by the White House because of trade practices it deem to be unfair. So what has happened so far? And what could the potential effects be?

It started with the first set of tariffs in January. These were on imported solar panels and washing machines following a petition by two US based solar manufactures. This was followed in March by tariffs on steel and aluminium on all countries (excluding Australia South Korea, Brazil & Argentina).

In May the White House announced it would impose a 25% tariff on $50 billion of Chinese imports that contain “industrially significant technologies”. These include jet engines, robotics, cars and machinery. This was in response to the “unfair trade practices of China over the years”. The first $34 billion tranche of tariffs came into effect July 6th with the second ($16 billion) coming into effect August 23rd. The US has pending tariffs on $400 billion worth of Chinese goods if there is any retaliation. Additionally the White House has threatened a 20% tariff on all imported cars, trucks and auto parts, which could wreak havoc on the European car industry.

The countries affected have responded with tariffs of their own, matching the US almost dollar for dollar. These have been predominately on steel, aluminium, agricultural products, among others goods. China has signalled that it might target prominent American companies such as Apple if the trade dispute escalates. One-fifth of Apple’s revenue comes from the Chinese market.

So what will be the effects if the trade war continues? While we can’t know for sure, most experts agree that the impact, generally, will not be good for investor confidence. Businesses that see a rise in costs will have three options: cut costs, absorb costs or pass costs onto consumers. The latter, which is the more probable option, could slowdown consumer spending and increase inflation, slowing global growth.

Within the hydraulic industry we will almost certainly see an increase in the cost for certain goods, however it is not all doom and gloom for local industry. The tariffs on US goods by major economies provides an opportunity for our local agricultural exporters, as the US is a major competitor in this market. If we see a pick-up in demand for local agriculture, this have a positive effect for the hydraulic industry around Australia.

The effects and length of these tit-for-tat measures is anyone’s guess, but one thing is for sure, the outcomes are sure to be felt globally whatever the result.