Despite the debate around trade deficits, IP transference and market economy considerations, China has become increasingly important from a top line perspective as well. And stagnation in segments of the Chinese economy have now impacted the top line of western manufacturers as well, creating a material impact on revenue and earnings.
Fact check: U.S. producers (e.g., Nucor, Steel Dynamics, AK Steel, etc.) spend more than Chinese producers on R&D as a percentage of revenue. Moreover, the Chinese, as they have in other industries, have moved to copy U.S. innovations.
China is losing the first salvo of the trade war with the US. While no one – except perhaps President Trump himself – believes that trade wars are “easy” to win, the victor of round 1 appears hard to dispute.
Based on our own research, we see three different strategies that industrial firms have taken to address the challenge of finding enough qualified workers.
For example, if an organization purchases a used 1000 ton press for $500K from a dealer in Surplus Record, they can immediately deduct that full amount from the top line of the business if they put the equipment into service during the calendar year.
While predicting Trump’s next tariff targets might be challenging – let alone which firms might end up on a sanctions list outside of trade battles – there are steps that all manufacturers can take to more effectively manage through the volatility.
The tariffs raise the broader question of what manufacturing firms will actually do in terms of their metals spending.
But a weak dollar is not necessarily a good thing for everyone – even manufacturers. Some, like Forbes, suggest there is a direct correlation between “the stock market [dropping] a thousand points [in early February], on the heels of the dollar losing 19% against the euro.”
manufacturers now have the option of purchasing both new and used property which can be fully expensed in the same year. Used equipment in 2018 will qualify for bonus depreciation in an identical manner to new equipment.