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Things can only get better.....

Last week's PMI figures, both here in the UK and Europe, pointed to a sharp slowdown in factory output. New orders are falling and, in the case of the UK, activity is sliding at its fastest pace since 2012.

Europe’s factory sector has been contracting for seven months and Germany, in particular, is showing increased signs of economic stress due to the slump in global demand for both cars and machinery.

While these figures reflect a wider slowdown in the global economy and the UK is having to contend with the ‘economic and political uncertainty’ that surrounds Brexit, the on-going US-China trade war, further exacerbated by the Trump Administration’s decision to extend tariffs on billions of dollars of additional imports from China, is now starting to seriously impact the electronics industry.

From the start of this month TV, drone or smart speaker imports from China, for example, will now attract a 15% tax, even Apple AirPods and Watches will now be affected.

According to Bronwyn Flores, a spokeswoman for the Consumer Tech Association in the US, a trade body that represents upwards of 2000 companies in the electronics industry, “prices are likely to start to increase this holiday season,” in the US.

Since July 2018 tariffs have cost the US electronics industry, and its suppliers, upwards of $10billion – mainly in terms of parts and components. These latest tariffs, however, are likely to start impacting finished goods.

“List 4A”, which is a list of tariffs that have just come into effect will impact devices from smart watches to lithium batteries and are expected to affect upwards of $50billion worth of consumer goods.

Leading companies like Apple are expected to absorb the additional costs but with further tariffs “List 4B” scheduled to come into effect in December and impacting smartphones, tablets and video games consoles, you have to ask how much longer can companies, even the likes of Apple, avoid passing those costs on to consumers?

Companies will be able to apply for exemptions but when the list of recession signals are flashing red this is just adding to uncertainty and to fears of an economic slowdown.

The prospects aren’t great then as we approach 2020.

Sluggish economic growth and potential currency devaluations are coinciding with a trade war that continues to weigh heavily on business confidence and is, according to a growing number of analysts, unlikely to end any time soon.

Author
Neil Tyler

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