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All change in America

November 9, 2016

donald_trump_august_19_2015_croppedAs the United States of America wakes up to the news of a new President, it is worth looking at some of President-elect Trump’s positions and how they might impact on the global office imaging industry.

On the subject of trade, he is in favour of taxing imports, and has talked about imposing tariffs and duties of 45 percent on China. Since most office imaging products in one form or another originate in China, such policies could have a significant impact on OEM and aftermarket supplies. The tariff is too big to absorb, and so would have to be passed on to consumers, and the corresponding price increase would reduce demand for new products.

The US market accounts for around 35 percent of the global demand for office imaging products, and the long-term effects of such a policy if it were introduced might be the repatriating of manufacturing jobs and capacity to the US.

Mr. Trump has also said that he is in favour of imposing tariffs of around 35 percent on goods shipped from Mexico, in an effort to prevent companies moving jobs south of the border. In recent years the larger remanufacturing businesses have used the benefits of the North Atlantic Free Trade Agreement (NAFTA) to move operations to Mexico to reduce manufacturing costs, access lower cost workers and avoid the impact of minimum wage legislation now enacted in several US states.

If a 35 percent tariff is introduced for goods coming from Mexico, then it may well be significantly cheaper for the same remanufacturers to repatriate the production and jobs back to the USA, and where the demand for remanufactured products may well increase if he does follow through with the 45 percent tariff on China.

As we saw when the UK voted for Brexit in June, this year the currency market adjusted rapidly for the change, and uncertainty and early trading after the US election result has seen the US dollar weaken, and the Mexican peso fall to its lowest-ever level.

With the presidency and both houses of the US government of the same political persuasion for the next four years, it will provide a rare opportunity for potentially game-changing policies to ripple around the world. For the office imaging market, prices will rise if the US dollar remains weak, and could rise even further if tariffs are introduced.

David Connett, Creative Partner, Connett & Unland GbR

d.connett@candugbr.com

 

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