In the corner of this black heart. A full deck of wild cards.
Tell me, are you scared to make a bet? Are you in or are you out?
With all the sins I’m thinking about. Or do you have a better bad idea?
[‘Better Bad Idea’, recorded by Sunny Sweeny, Americana artist, 2017.]
Following on the topic last month’s newsletter, the storm caused by US trade policy continues. The last week has been in equal measure chaotic, erratic, haphazard, harebrained and slapdash. Many companies are frozen in their tracks – uncertainty is so great; they’ve pushed the pause button on new product development.
Other projects have experienced whiplash – new tariffs on hardware manufactured offshore plus reciprocal tariffs on components and subassemblies going in the other direction to support the build (“are you in or are you out?”).
While everyone at EastBridge would love to see a resurgence in US manufacturing, and we source and build plenty of products at home, when it’s feasible and makes sense. What’s happening now isn’t going to take us there and ignores the economic concept of comparative advantage found in global centers of excellence. In fact, the current approach is harming US manufacturers right now. And not for a brief or transitory period.
Real example: we do a lot of work in the professional audio and prosumer audio segment. We supply a broad range of specialized parts to our customers in the West, which are incorporated into complex finished audio products. One item is micro loudspeakers that are in the ear cups of your headphones and other hardware.
How many micro loudspeaker manufacturers are in the US? That would be zero. How many are located outside of China? Close to zero. How long will it take to build and start-up a loudspeaker factory? Two years.
Beyond the growing and unprecedented cost increases and the absence of substitute components and vendors, there’s no flipping the switch for companies that procure hardware. Setting up a new source of supply anywhere is a lengthy process that includes confirming capabilities & constraints, drilling down on the detailed specification, negotiating the price, terms & conditions, commissioning tooling, building samples and first articles, scaling to volume, establishing a QMS and finally shipping the products.
And all of this depends on whether there’s a factory that’s ready to roll.
Economic and international trade policy are above my pay grade; however, I do know that what’s happening now won’t work and will drive some companies out of business. What’s needed now is a “no available substitute” exception to be negotiated and implemented to allow production to continue. Unless someone has a better bad idea…
Cheers,
Jack Daniels 617-285-2486