[Text/Observer Network Chen Sijia] After taking office, US President Trump insisted on provoking the "tariff war", imposing high tariffs on China in an attempt to promote the return of manufacturing to the United States through this means. However, many companies and analysts pointed out that American industrial production relies on Chinese equipment, and Trump's tariff policy has instead become an obstacle to the return of manufacturing.
"Trump's 'golden age' needs factories, and factories are calling for the cancellation of tariffs on China." According to a report by Bloomberg on May 2, more than 180 companies have submitted over 1,100 applications to the US government seeking tariff exemptions for importing Chinese equipment. Experts said that American manufacturing depends on imported inputs, and the tariffs on China have led to a decline in factory output in the US. Trump may ultimately have no choice but to agree to exemptions.
The report stated that Trump's practice of imposing high tariffs has already affected the production of enterprises within the US. A report released on May 1 showed that US companies are responding to the "unknown economic environment" brought about by the tariff policy, with declining product orders and factory output. The activity of American factories contracted at its largest extent since February 2020 in April.
The negative impact of tariffs is forcing companies to take action. In recent months, more than 180 companies have submitted over 1,100 exemption applications to the US government, hoping to import machinery and equipment from China. Bloomberg noted that the vast majority of these applications were submitted after Trump took office, with over 730 submitted to the US government in March.
A surge in Chinese equipment tariff exemption applications received by the US government - Bloomberg report screenshot
"With tariffs, it's impossible to buy machines."
Tesla, an electric vehicle company and Trump ally billionaire Musk's enterprise, expressed in four applications submitted on March 31: "Granting tariff exemptions for manufacturing equipment can encourage and accelerate the development of American manufacturing as well as industries in which American industry may have strategic interests in China. Tesla seeks exemptions to enhance its manufacturing capabilities in the US."
In a conference call with investors in April, Tesla CFO Vahab Tarzia said that tariffs on China will have a "significant impact" on Tesla's energy business because the company is procuring lithium iron phosphate batteries from China. Tarzia revealed that Tesla is debugging manufacturing equipment to produce such batteries domestically in the US, but the existing equipment cannot provide sufficient capacity.
Ford Motor Company, another automaker, has filed more than a dozen different exemption requests, mainly related to the import of machines required for building a battery plant in Michigan. For example, Ford applied for an exemption for a piece of equipment needed to manufacture lithium-ion batteries on March 31, and the representative pointed out that similar equipment has never been produced in the US.
Hitachi's subsidiary responsible for air compression business has submitted 141 tariff exemption applications to the US government, all of which submitted in March are related to parts needed for manufacturing air compressors at its factory in Indiana, which employs approximately 700 people. The company said: "We are waiting for the decision of the Office of the US Trade Representative."
For some small businesses in the US, tariff exemptions are crucial to their survival. Ryan Neel, who runs Neel's Saddlery and Harness, sells industrial sewing machines made in China in the US. He said that the last container of duty-free machines arrived in the US last week, and he has frozen all future orders until the tariffs on China are reduced or exemptions are approved.
Neel told Bloomberg that he had six months' worth of inventory, but he had to inform his customers that Trump's tariff policy prevented him from completing a $160,000 order. Neel said that the tariff rate on the machines he imports has reached 152.5%, and they "cannot make money by importing these products."
Evolutions Brands, a footwear manufacturer, originally planned to set up a factory in Texas to move production back from Mexico to the US, but the tariff policy forced them to suspend their plans. Co-founder Nora Orozco said they have submitted more than 20 exemption applications to the US government. She bluntly said: "With tariffs, it's impossible to buy machines."
Bloomberg said that these applications still need to go through a series of procedures by the US government, and these companies said they have not received any response yet. The Trump administration has not indicated whether it will consider these applications, and neither the Office of the US Trade Representative nor the White House responded to requests for comment.
On April 30, the Red Hook Container Terminal in New York City - Visual China
"They are heading toward the situation where they need to approve exemptions."
Data from the National Association of Manufacturers shows that nearly 60% of US imports are inputs for manufacturing. Charles Crain, executive vice president of the organization, said that the uncertainty brought about by Trump's tariff policy is putting pressure on factory operations, and they have called on the Trump administration to grant exemptions for key components and raw materials.
Deborah Elms, head of trade policy at the Hinrich Foundation, believes that the Trump administration will have to grant tariff exemptions for manufacturing equipment. "Especially because one of the goals of the US tariff policy is to promote the return of manufacturing, setting additional tariff barriers on the path to achieving this goal makes little sense."
Current and former officials in the Trump administration acknowledged that the US needs to offer incentives and exemptions to manufacturers. The report said that US Treasury Secretary Beasant has proposed tax relief measures, such as allowing companies to recover the cost of buildings and equipment constructed in the US.
Robert Lighthizer, who served as US Trade Representative during Trump's first term, also hinted that the Trump administration will have to follow the approach of the first term and initiate an exemption process. "They are heading toward the situation where they need to approve exemptions," Bloomberg noticed that during Trump's previous presidency, companies submitted 30,000 China tariff exemption applications to the US government.
Financial Times reported that the return of manufacturing was the cornerstone of Trump's economic agenda, but Trump's comprehensive imposition of tariffs has shaken the US economic outlook. In addition to the cost pressure brought by tariffs, US factories also face a shortage of labor, with more than 500,000 jobs still vacant in March.
To address this issue, the Trump administration is trying to promote the robotics industry to fill the gaps with industrial robots. However, experts said that current robot technology is not yet mature, and the cost of deploying robots is extremely high.
Financial Times said that although the price of industrial robots is rapidly decreasing under the promotion of Chinese manufacturers, the retail price of low-cost devices like "collaborative robots" is still between $25,000 and $50,000. If considering the demand for sensors, safety fences, conveyors, and other infrastructure, integrating robots into factories may be even more expensive.
Susanne Bieller, secretary-general of the International Federation of Robotics, also said that finished robots and key components in the US rely on imports, with leading industrial robot manufacturers located outside the US. Trump's tariff policies will impose a "huge burden" on US companies seeking to purchase robots.
Due to Trump's tariff policies placing manufacturers in an uncertain economic environment, companies remain cautious about large upfront capital expenditures. Bieller said: "If you want to spend money on automation, you need to ensure a stable strategy that lasts for many years first."
Data from the research platform Public Spend Forum shows that the US invested approximately $6 billion in robotics R&D between 2018 and 2022. However, the US government has consistently lacked a national robotics strategy, and the Trump administration cut federal scientific research budgets after taking office. By contrast, thanks to government support, countries like China and South Korea have already surpassed the US in terms of robot adoption rates.
Melonee Wise, chief product officer of US robotics manufacturer Agile Robots, said: "Tariffs are punitive. I don't think we will see any form of (automation) transformation without large-scale or clear incentives."
This article is an exclusive contribution by Observer Network and cannot be reprinted without permission.
Source: https://www.toutiao.com/article/7499803027470172699/
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