What to Expect When New Tariffs Are Imposed
There's been a lot of upheaval and uncertainty in global markets recently, and, for the United States, part of that is the new imposition—by both America and China—of tariffs. Beyond any financial arguments about whether or not trade wars are good and easy to win, there's no doubt whatsoever that trade wars, specifically in the form of tariffs, will change the market. And though it may take a while for these effects to be felt by the public, the impact of tariffs will be felt first and most deeply by manufacturing.
Big Industries Get Hit
Tariffs can have a huge impact on manufacturing and many other American businesses in unexpected—but understandable—ways. The U.S. has recently gone after the industrial sector with tariffs specifically targeting steel and aluminum.
Any steel or aluminum coming into the U.S. from specified nations now has an additional percentage cost added to the existing price. In other words, tariff impact on manufacturing means foreign steel and aluminum providers now have to pay an additional 25% and 10%, respectively, before they can cross the border into the U.S. and be used by American businesses.
Of course, steel and aluminum are pretty commonly used materials in a wide variety of industries, businesses, and applications. So, that extra cost will affect more than just the materials industries that are importing them into the country.
Tariffs Generate a Widespread Ripple Effect
As steel and aluminum import taxes increase, many businesses feel a ripple effect. Not only do tariffs impact the manufacturers of these metals affected, but also a manufacturer’s clients who turn steel and aluminum into consumable products.
For example, cookware and plumbing manufacturers will pay premiums for the materials needed to produce their goods. Further down the line, bakeries, restaurants, hardware stores, plumbers, and many other tradespeople will see increases in the cost of steel-based and aluminum-based products that are necessary to their professions. In turn, those bakers and plumbers must now decide whether to absorb the loss or raise the prices of goods and services to their customers in order to offset the price increase on metals.
Every link in the chain is affected by tariffs: the first-level producers, manufacturers, small and mid-sized businesses reliant on those products, and finally the everyday consumer.
What to Do About Tariffs
Governments know that tariffs are going to have a huge impact on the economy of the other countries involved a trade war. That’s why they are effective means of negotiating market conditions. However, many businesses and consumers get caught in the middle. So what can a small or mid-sized business do as tariffs are on slapped on the products they need?
While it may not be the solution for every manufacturer, one effective way to mitigate tariffs on manufacturing is to source materials from unaffected nations. Steel and aluminum, for example, are receiving tariffs from many nations, but Australia and Argentina are exempt. Sourcing metals from these countries means business can go on as usual.
For businesses using metal-based products, it may be best to arrange your affairs before tariffs begin to affect you. For example, if you need new tech equipment, with aluminum and steel parts, purchase that equipment soon or second-hand. You can also make more strategic business moves when scaling up. Say you're looking to expand your restaurant business to new cities, consider purchasing a space that's already outfitted with most or all of the features you'll need, so you can reduce the costs associated with acquiring new, and often imported, materials.
If you'd like to know more about tariff impact on manufacturers or which tariffs may affect you, reach out to your GJM team. Let us guide you through a complex, ever-shifting market and global trade climate.
Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting services and provides comprehensive services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.
Export and Thrive
Don’t leave money on the table. That’s exactly what you could be doing if your manufacturing business isn’t at least staying open to the idea of expanding from a local, regional, or national presence to a global footprint. Did you know that exports of manufactured goods from the United States to other countries were over $1.4 billion dollars in 2014? That’s according to The International Trade Administration and U.S. Census Bureau.
Why shouldn’t your business have a piece of the pie? D. Paul Zito is the Vice President of International Development at Toledo’s Regional Growth Partnership. We had a chance to ask Paul about opportunities available to businesses in Northwest Ohio ahead of a September 2017 event offered in Cleveland by the U.S. Department of Commerce called Discover Global Markets.
Our first question for Paul: Is now a good time for Ohio manufacturers to consider expanding beyond the U.S. and If so, why?
Paul: Yes it is. Some 80% of the population and commerce are located outside of the US. Failure to consider exports is very much a lost opportunity. The growing middle class and developing industrial base in countries such as India, China, Mexico and others in Asia, the Middle East and Latin America have created a great demand for finished US goods and industrial equipment, parts, components and systems. In Europe, Australia and Canada the move to Industrie 4.0 (automation, IOT-Internet of Things, etc.) has created a great demand for quality US machinery, components and parts. Perhaps most importantly, having a good export market protects US companies from any downturns that they may experience in the US market- a good way to spread risk.
Speaking of risk, what are the risks associated with expanding internationally?
Paul: Risks include: Intellectual Property risks (counterfeits, theft of technology); currency exchange risks; lack of efficiency with international payment instruments (international wire transfers, Letters of Credit….) and overseas remittances; overseas tax issues; and credibility of overseas customers/distributors. That is why I always say that in exporting or any international business scenario, one needs to have a very good banker, lawyer and accounting/tax firm. GJM with its long and broad experience in international business and with the resources provided by the RSM network is perfectly positioned to counsel exporters on tax and financial issues as well as general information on overseas markets. I have seen the RSM network in action around the world and it provides a wonderful resource in many respects for exporters.
How do you know when it’s time as a manufacturing business to start exploring exports?
Paul: A variety of ways. When staffing and production capacity allow for servicing and supplying a new market. When one learns something about demand from another country. Perhaps the best time is when a manufacturer meets a potential customer or distributor from another country that is motivated and seems to be on the same page as the US manufacturer with regard to how they approach the markets in their own country/region. Great opportunities for such meetings can be had at just about any major US trade show or conference in any industry.
What is the US commercial Service and how does it help businesses?
Paul: The US Commercial Service (also called “Foreign Commercial Service”) is part of the US Department of Commerce and is comprised of personnel at the US embassies and consulates around the world along with the staff in Washington and staff at various locations around the US, including Cleveland. The US Commercial Service conducts research in other countries for US businesses and can perform agent, distributor, customer and partner searches in other countries. The website for the US Commercial Service is a great resource with country commercial guides and industry-specific briefings around the world.
Can you think of some local/regional companies that have recently expanded internationally and were successful?
Paul: Dana Corporation. See: http://www.toledoblade.com/business/2017/06/25/Dana-gears-up-for-off-road-markets-Maumee-company-known-for-auto-parts-makes-components-for-huge-Ferris-wheel-more.html. Though this is an international acquisition and not exporting, it illustrates the new markets that the acquisition brings to Dana.
Bionix. See: http://www.toledoblade.com/local/2012/05/18/Exports-from-Toledo-on-rise.html. Though this story is five years old, their exports continue to rise.
What kinds of opportunities are available for businesses attending the Discover Global Markets event? What will they learn? Who will they meet?
Paul: The chance to meet with companies, agents and consultants from around the world; an opportunity to learn about a wide array of export issues; and the chance to meet with US Commercial Service staff from around the world. Businesses will also benefit from meeting companies from across Ohio and the US who could be potential partners and/or good resources for their export strategies.
What types of businesses would you encourage to attend the Discover Global Markets event?
Paul: I would encourage attendance by any company that is new-to-export or that has been exporting but wants to expand their export markets and learn how to create greater efficiencies in their export strategies and processes.
Any final thoughts?
Paul: It has been said “export or die”….I prefer to say “export and thrive”. Statistics show that exporting companies are more stable and more profitable than companies that do not export. Exporters are generally more “healthy” than companies that do not.
Gilmore Jasion Mahler’s Manufacturing Specialist Group works with many manufacturing businesses across the region and offers manufacturing roundtable events three times a year to manufacturing CFOs. If you're the CFO or financial decision maker within a manufacturing business and would like to receive invitations to future GJM roundtable events, you can sign up here. Please note in the message section that you'd like to receive Manufacturing & Distribution Roundtable invitations. Recent roundtable topics include the skilled labor shortage, 2017 economic outlook and post-presidential election crystal ball. GJM Manufacturing Specialist Group lead Charlie Heid recently joined the Regional Growth Partnership International Committee.
Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers comprehensive financial services including assurance, business advisory, tax, risk advisory and healthcare management. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities. Follow us on LinkedIn, Twitter and Facebook.
Gilmore Jasion Mahler, LTD Marks 20 Years in Business
Stamps were 32 cents. DVDs launched in Japan. Dolly the sheep was cloned and Tickle me Elmo was the holiday toy sensation.
The year was 1996, the same year that two young professionals decided to go into business for themselves. Little did they know their decision would benefit thousands of businesses, families and individuals, and better our community as a whole.
In March of 1996, Adele Jasion and Kevin Gilmore were both working in the accounting industry in northwest Ohio. They decided to team up and break out on their own, establishing their own firm called Gilmore & Jasion. With only 11 employees, they launched their new business just a month before the April 15 tax deadline, a bold move in the accounting business.
”I was always confident that we could become the alternative to what is now the Big Four,” says Gilmore, referring to the top national firms. “I just wanted to be the best. I wanted to be the firm that people wanted to go to. That was my vision.”
Partner Adele Jasion says there was a need at the time for a high quality local firm with diverse resources that provided personal attention to clients. She says Gilmore & Jasion was able to meet that need.
“The timing was actually good. The big firms were shedding clients, reinventing themselves, more interested in the very large public company work, not so much in the privately-held companies. Right place, right time,” she says. “We had the skillset to service those clients.”
In the fall of 1996, Andy Mahler came on board as a partner, giving the firm its current name Gilmore Jasion Mahler, LTD. Mahler retired in 2008. Five years later, Pry Professional Group in Findlay merged into Gilmore Jasion Mahler. Now, with two offices and over a hundred employees, GJM is northwest Ohio’s largest public accounting firm.
The last 20 years have brought remarkable change to the industry and to client service. There was no email when GJM was established. Tax returns were printed out and mailed. Now, technology has catapulted the Firm forward with cloud-based accounting services. Sharing information and documents with clients has never been faster, more convenient or as secure.
Those choosing the profession have also changed. Adele Jasion says it wasn’t common to have a woman co-owner of a CPA firm in the mid 1990’s. She describes the accounting industry as a typically male-dominated field for decades. But, she says, that has changed slowly over time.
“I’m very proud to say that of the fourteen partners we have today at GJM, six of them are women. We’re providing a good example for young women choosing our profession.”
“GJM is far from a “stuffy accounting firm” to say the least,” says one such young woman, Audit Associate Lauren Grana. “It is not an everyman for themselves environment where no one communicates and keeps to themselves. Everyone is encouraged to ask questions when they don’t understand, share discoveries that others may benefit from, and share victories together.”
Gilmore Jasion Mahler has challenged the typical CPA firm model from the very start, working closely with clients, getting to know their businesses and building a responsive, friendly relationship. The firm has developed expertise in particular industries, including healthcare, construction & real estate, utilities and manufacturing & distribution. Services cover a broad range from business advisory to tax to business valuation. The Firm has exceled as a community partner as well, supporting charitable causes in both the Toledo area and Findlay-Hancock County region. Many employees sit on the boards of local nonprofits and the Firm is involved in events year-round to support many organizations and causes.
Gilmore Jasion Mahler, LTD is ever evolving to meet client needs and attract new talent, but one thing that hasn’t changed is the supportive nature of a business that started twenty years ago with nothing more than a vision.
“Add good people, add good clients,” says Gilmore. “It wasn’t about being big, it was about being the best quality and with that would come success and growth. We have a great deal to be proud of.”