In the AV industry, we design and build projects using the tools of our trade. Since the 1930s, this has involved both B2B and B2C buying and selling of products. A manufacturer provides products that we buy and sell to our customers. The value we add lies in designing and integrating these products into systems that (hopefully) work seamlessly.
We originally bought products that were made in America. However, over the last 50-plus years, we have increasingly bought products that were manufactured overseas. For many years, the country of origin was Japan; in more recent times, however, Mexico, China and Canada have risen to the top.
As astute observers will note, this article is about supply chains. Do not change the channel now, because this is about to affect all of us in the commercial AV industry again.
Reared Its Ugly Head
Most recently, the issue of supply chain reared its ugly head during and after the COVID-19 pandemic. Oversimplifying things, those shortages were caused by an insufficient supply of certain components that were critical parts of the technology we buy and sell. The result was that the supply chain slowed up, or, in some cases, shut down completely. Most (but not all) of these issues have been mitigated to a certain degree, and the supply chain currently appears relatively stable. The key words there are “currently appears.”
The weak link in the chain is our reliance on outside resources and the apparent necessity to import products and/or components from foreign countries. The obvious answer is to make everything in the U.S., right? As we know, there are issues with some raw materials, manufacturing capabilities, labor and the 800-pound gorilla of cost. In the context of existing trade policies, our government must consider how to strike a trade balance (import versus export) and assess what is economically feasible. Suffice it to say that the cost structure of manufacturing varies greatly from one region to another.
In the U.S., a “perfect world” would mean having an exact balance of trade between imports and exports. As a point of refence, in January 2024, the U.S. imported $324.6 billion in goods and services and exported $257.2 billion in goods and services.
To go a bit deeper, we should consider two of the U.S.’ major trade goals: (1) to protect American IP and (2) to prevent foreign manufacturers from dumping. Dumping takes place when foreign producers sell a product in an overseas market at a price lower than the price they charge in their domestic market. In such a case — exporting a product at a price below its normal value — the exporter is often trying to gain market share or harm domestic competitors in the importing nation.
The ‘Perfect World’ View
We all know that this “perfect world” view is aspirational. We have had (at best) varying degrees of success trying to make it the case. Probably the best example of challenges relating to both IP protection and dumping is China. We have come to rely on their uncontrolled and unpaid-for use of our IP, and their inexpensive manufacturing of finished goods and parts, to keep consumer prices in the U.S. in check.
As most of you know, one tool our government has used to respond to trade issues has been imposing tariffs. Tariffs are a tax on imports. Governments often impose them to protect national security, bolster domestic businesses and raise revenue. At one level, this seems like an effective approach. Simply charge the offenders more and, thus, you’ll raise their export costs and level the playing field. But not so fast. This is much, much more complex and involves walking a tightrope with consumer prices.
New and Uncharted Territory
This is where new and uncharted territory comes into play. With the new administration coming into power, there’s a lot we don’t know about its trade policies and tariff plans. Late last year, President Trump had announced that, the very day he was inaugurated, he planned to “…sign all necessary documents to charge Mexico and Canada a 25% tariff on all products coming into the United States….” One thing seems pretty certain: Tariffs will go up.
If history is any indication, that means the supply chain will be affected and price increases will likely follow. The point here to become aware and prepare accordingly, as best you can.
Alan C. Brawn, CTS, DSCE, DSDE, DSNE, DCME, DSSP, ISF-C, is principal of Brawn Consulting.
