Local manufacturers are working to control what they can in an environment of constant economic uncertainty driven by President Donald Trump’s ever-changing tariff policies.
Since early this year, economic uncertainty has continued to slow down planned capital investments and improvement projects for the state’s manufacturers, said Chris Baichoo, executive director and CEO of Madison-based WMEP Manufacturing Solutions.
“The water is still very murky,” said Baichoo. “Tariffs are really creating a lot of margin compression and input costs are rising. Manufacturers are competing for a smaller slice of the pie.”
Manufacturers are working to implement whatever cost-saving and optimization measures they can now, regardless of the tariffs, said Baichoo.
WMEP is working with local manufacturers to help them reduce lead times, improve their quoting process, boost their speed and optimize the layout of their facilities. The organization can also help manufacturers break into new, profitable markets including life sciences and defense.
“If a company has a fixed amount of resources, we can help them take those resources and put them into markets that are growing,” said Baichoo. “These are things that really help offset tariff costs.”
WMEP is encouraging clients to be pragmatic when considering ways to offset tariffs.
In the coming months, Baichoo believes manufacturers that sought to offset tariffs by purchasing larger inventories of supplies at the start of the year will find themselves in “more dire” conditions as those low-cost materials run out.
Already, WMEP is seeing some clients considering alternatives like redesigning products or swapping out materials. In some cases, manufacturers are evaluating if it’s cheaper to have products shipped into the U.S. in pieces.
“I think we’re on the precipice of it getting to be ugly, because a lot of that (cheaper) material is running out,” said Baichoo.
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Constant communication
For metal fabricators like Milwaukee-based Argon Industries, the only realistic tariff mitigation option when the rate for metals is so high is passing along price increases to customers.
Gregory Clement, president of Argon Industries, began receiving a new batch of price increases from suppliers in the middle of June. Most of those increases, which went into effect on July 1, are being passed on to customers because Argon Industries is not able to absorb them.
He’s prioritizing transparency and making sure clients are fully informed of what Argon Industries is paying for materials.
“It’s basically just constantly keeping the customer informed about what’s going on,” said Clement. “When we’re quoting, they see that number, and then as we’re updating pricing, they see that number as well.”
Argon Industries used to be able to lock in materials three months ahead of time to help mitigate price increases. Now, the business is often asked to pay for materials at the time they’re received.
In the coming months, Clement said he’ll be keeping an eye on whether the U.S. finalizes negotiations with Mexico and Canada. Argon Industries has relied heavily on Canada as a supplier of aluminum.
Clement says increasing tariffs on Canadian goods when the country has served as a good supplier “doesn’t make any sense.”
“It is stressful because it affects the whole company,” he said. “We’re constantly monitoring pricing and repricing. It takes a lot of time and effort.”
Ongoing uncertainty
Ed Paradowski, president of Kenosha-based Reflective Concepts, also finds himself in a tough spot as a local metal fabricator.
Reflective Concepts is one of a handful of Wisconsin manufacturers using metal that goes through an anodizing process twice, creating a highly reflective material. Reflective Concepts uses that metal to make components for the lighting industry. Globally, only two suppliers in the world sell this highly reflective metal – one is in Germany and the other is in Italy.
When the first round of tariffs was introduced in February at 25%, Paradowski leveraged his relationships with his suppliers to find operational efficiencies like placing larger orders and paying in euros versus dollars. But then, the second round of tariffs at 50% hit in June.
“We’d already grabbed all the low hanging fruit, so any opportunities for further efficiency gains really weren’t there,” said Paradowski. “This was a pure 25% incremental hit.”
Basic metals like carbon steel cost around 45 cents a pound. The metal that Reflective Concepts uses costs between $7 and $10 a pound, not adding in tariffs.
The company has implemented price increases on some items to help cover costs. The increases vary greatly and can be anything from fewer than 5% or up to 20% depending on the product.
While Paradowski supports Trump and his goals of promoting fair trade while bringing manufacturing back to the U.S., he questions the president’s methods in doing so.
“I question it sometimes, because the easiest way to get people to put their checkbook in their pocket and button it is to create uncertainty,” Paradowski said. “Right now, there’s just an awful lot of uncertainty.”
