Us plastic machinery giant Milacron takes a double-sided view of China tariffs
As you might expect, Milacron Holdings Corp., the largest manufacturer of plastic equipment in the United States, would support 100 percent of the Trump administration's decision to impose tariffs on Chinese-made plastic equipment.
But it's not as simple as that.
Milacron weighed in with the administration ahead of a May 15 hearing on the tariffs, opposing some of them and supporting others.
Milacron took a "Swedish-style buffet" approach, saying it supported a tax on Chinese plastic machinery that directly creates competition.
But then it argued that tariffs should not target the Chinese-made components on which it relies heavily because of the global nature of its supply chain. Otherwise, its costs would rise and its equipment would become less competitive globally.
Milacron showcases Cincinnati 2250 injection molding machine at NPE 2018
Likewise, one of the largest trade groups in the industry. — The American Plastics Industry Association, the position is also very delicate.
It told the Office of the United States Trade Representative (USTR) that while it has concerns about China's trade practices, its membership is split, and it urged the administration to take a more targeted approach than tariffs that would "put the United States at risk of a trade war."
In short, "caution" has been the attitude of some of the bigger players in the industry lately, as companies and Washington prepare for official U.S. government hearings on tariffs.
About 15 to 20 percent of the nearly $500 million in annual supply chain purchases come from China, much of it impossible to source in markets outside of China, Milacron said.
"Imposing tariffs on these components would significantly disrupt our supply chain and cause our costs to rise, which in turn would impede growth, raise prices in China in the United States and make us less competitive globally compared to our competitors, especially in low-cost markets," the company said.
It estimated that the Trump administration's 25 percent tariffs on its supply chain would increase its costs by more than $7.35 million, while competitors in other countries would not face such problems.
"(This) will cause our selling prices to increase and make our products less competitive, jeopardizing Milacron's global sales and U.S. jobs, "the company said.
Without the 25 percent tariff the Trump administration wants to impose, European and other non-Chinese competitors will still be able to buy Chinese-made parts and be able to export their machines more competitively to the United States, Milacron added.
But the company also supports having Trump impose tariffs on finished Chinese plastic machinery, telling the U.S. Trade Representative that the tariffs would "offset the advantages gained by Chinese manufacturers through unfair trade practices, thereby ensuring Milacron's continued growth and competitiveness in the global market."
The Chinese government's push for the Made in China 2025 policy, including a focus on machine tools and automation, puts Milacron's investments in the United States at risk, the company said.
"Inspections of unfairly traded Chinese imports [of forming machines] have become key to allowing Milacron to maintain its U.S. operations and workforce," the company said.
The Washington-based Plastics industry Association said the proposed tariffs were too broad and would lead to higher prices in the plastics industry's supply chain, despite concerns about intellectual property theft in China and whether the Chinese government supports its industry.
It believes the tariff talks are already hurting job growth.
"The threat of tariffs has increased uncertainty across the sector, which in turn has led to caution associated with increased investment and job growth," the group said.