Local firms stockpiling imports to avert tariffs
Some buy raw materials ahead of promised fees
By: Daniel Munoz
NorthJersey.com
USA Today Network - New Jersey
..... From an apparel maker in Newark to electrical distribution manufacturers in Kerany, the prospect of tariffs in trump businesses facing uncertain prospects.
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For some, it's a "wait and see" approach, said Peter Connolly, director and chief executive officer of the New Jersey Manufacturers Extension Program. "They want to wait and see what he actually implements," Connolly said of President-elect Donald Trump.
..... Others are not waiting around.
..... Trump has promised he will quickly enact 25% tariffs on goods coming form Mexico and Canada, and additional 10% tariffs on anything coming from China; he previous promised 60% tariffs on goods coming form China.
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While some North Jersey companies manufacture their products in the U.S., some still import their raw materials from china, including Kearny-based Mac Products, which makes electrical distribution and transmission products, said owner Eddie Russnow.
..... Russnow said Mac Products is "ordering forward" with its Chinese suppliers for the steel and copper sued for many of Mac's components.
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The plan going forward is to see where the raw material can be sourced domestically, Russnow said, but the expectation is that Mac will take a hit to its profits, since any new tariffs against China will make the imported raw material he needs more costly, and the company can't raise prices.
..... "If [companies] have an increase in their costs because of the tariffs, they're either go to increase the cost to the customer, take a hit internally or reduce their profit," said Tom Bracken, president of the New Jersey Chamber of Commerce.
..... The last option means finding "savings in other places," Bracken said - usually through job cuts.
Why does Trump want tariffs?
.... Trump's state goal with tariffs is to shift more manufacturing domestically to the U.S.
..... Many economists have criticized that notion, saying tariffs would trigger a trade war that would create obstacles for U.S. businesses to export their products overseas, and cause prices to rise on consumer goods on American store shelves.
..... "Despite Trump's assertions to the contrary, tariffs are paid by the companies or entities importing goods and not by the countries themselves," said Neil Saunders, a retail analyst and managing director of GlobalData.
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"This means the cost of buying products from overseas, whether directly or as an input for manufacturing, would rise sharply,' he said.
..... Most of the costs of tariffs would be borne by consumers, ultimately trigging more inflation and eating into the national gross domestic product, said Parul Jain, who teachers fiance at Rutgers Business School in Newark.
..... "Smaller manufacturers, conceivably, could be extra challenged by transition costs," said a recent post by the New Jersey Business and Industry Association. "Larger manufacturers, also conceivably, might find tariffs an opportunity to rebuild their supply networks.
Tariffs, automation could make NJ-made more competitive
..... At Unionwear, a Newark-based company that produces apparel such as hats with the "made in USA" logo on them,CEO Mitch Cahn i optimistic that the combination of tariffs and automations will make his products more competitive with imported goods.
..... Still Cohn said the company is expected the automation machinery at the end of January and is in the process of pushing the delivery up ahead of Trump's inauguration day which is January 20. [2025]
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Cahn said there will be demands for "Made in USA" products thanks to the combination of the nation's 250 birthday in 2026, the 2026 World Cup being hosted in several U.S. stadiums, including MetLife in the Medowlands, and the 2028 Summer Olympics begin held in Los Angeles.
..... "Tariffs will increase the cost of imported bags by 10% to 25%, Cahn said. "Automation will reduce the cost of domestic bags by 75% by enabling the same labor to product three times as much as they currently produce. These two together will significantly close the gap between import and domestic prices.