By Timothy Aeppel
(Reuters) - America’s heavy equipment makers aim to make tariffs an election year issue after losing market share to imports of foreign goods as a result of the levies on inputs imposed by the Trump administration.
The top 10 countries that export construction equipment to the United States gained 9% in market share over the past year, largely due to a loss of competitiveness for domestic producers as tariffs pushed up the cost of imported parts and steel and forced many to raise prices, according to a report seen by Reuters that was set for release on Tuesday by the IHS Market research group.
The study was commissioned by the Association of Equipment Manufacturers, a trade group that represents North American-based manufacturers and suppliers. The study covered lost sales from tariffs through last year, before the coronavirus outbreak further upended global supply chains and is feared to hurt demand as global growth slows as a result.
Equipment makers, gathered this week for their major trade show in Las Vegas, are pushing Washington for relief from tariffs and encouraging politicians to view this year’s presidential race as a “manufacturing election,” where stances on issue like trade will influence voting in key battleground states like Ohio and Wisconsin. The study highlights how tariffs have hurt domestic producers, rather than helped them, by giving importers a price advantage.
“The benefits of tax reform and regulatory change have largely been canceled out” by trade policy, said Dennis Slater, AEM’s president.
The study found that domestic employment in the industry grew last year, but, at 1.2%, much less than the prior year's 5.9%. Economists at IHS said the slower job growth was partly due to weaker construction and manufacturing, but also the result of tariffs. The researchers now estimate that tariffs will ultimately cost the industry 3,400 jobs.
Terex Corp (N:TEX) is among those that laid off both temporary and permanent workers last year, due to a weaker manufacturing economy in part caused by trade uncertainty, said Chief Executive John Garrison. Terex, based in Westport, Connecticut, had sales last year of $4.4 billion.
“Where we increased prices, we did see some share impacts” as foreign competitors won orders away from Terex, said Garrison. “We attempted to pass on our tariff-related costs —some were successful, some not. That led to very difficult conversations with customers.”
The IHS study noted that growth in the sector “has been increasingly met by imports” due to tariff-related price increases among domestic producers. The two biggest winners, the study notes, are Japan, which saw its share of the U.S. market for construction equipment grow by 15% last year, and Mexico, which grew its share by 16%.
Rod Schrader, CEO of Komatsu America Corp, the U.S. division of Japan’s Komatsu (T:6301) with a large factory footprint in the United States, said his company held onto customers by eating the cost increases to fight off import competition.
“We’ve taken the approach that basically we're absorbing it,” he said. “There’s a market price that we have to compete with — so we’ve pushed our manufacturing facilities to accelerate cost reductions.”
Some companies have moved some production out of the United States to avoid tariffs. Husco International Inc, a maker of auto and heavy equipment parts in Waukesha, Wisconsin, formerly supplied markets like Brazil from its U.S. plants.
“Because of tariffs, I had to shift that work to India — then export from India to Brazil,” said Austin Ramirez, the company’s CEO.