With the election decided, there's potential for broad-based tariffs (~20%) and mass deportations (spokeswoman this morning said they'd start with millions on day 1) that would further squeeze shortages in unskilled labor.
How are you thinking about these two items in your search? I had been interested in light manufacturing, but now will be spooked by anything that relies on imported components/inputs. I'm also more wary of anything with meaningful unskilled labor cost (even if you don't hire undocumented workers, mass deportations would exacerbate unskilled labor shortages pushing costs broadly up).
On the other hand, Trump rarely delivered on anything he said he'd do in his first term, so maybe these things aren't even worth considering in the search process.
Where are you landing in how you think about them?
This is not a political post and I'm not looking to debate these proposals. Just acknowledging the proposals have been repeated for a long time leading up to the election so we need to think about their impact.
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by a searcher
from INSEAD
in Kirkland, WA, USA
in Kirkland, WA, USA
1yr ago
How are you thinking about broad tariffs and exacerbated labor shortages?
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by an investor
1yr ago
in Boston, MA, USA
in Boston, MA, USA
From my perspective on tariffs, the competitive landscape won’t change much due to the homogeneous effect of tariff hikes on all manufacturers within their respective markets i.e. competitive advantages won’t arise in individual businesses because everyone’s variable costs will increase proportionally.
In the electronics industry, we – and all of our competitors – have already been paying 25% tariffs on electronic components from China sinceredactedThese costs are passed along to our customers like any other without question because they understand we also need to be profitable to survive. Our customers don’t have a choice if they want to build products and end-users ultimately bear the costs.
Individual competitors may choose to absorb some of these costs and decrease profitability but this applies to any economic/market environment at any given moment in time. The market tends to reach another equilibrium under the new cost model.
On the demand side, increased spending power resulting from reduced income taxes, economic growth, or other vehicles will have to offset cost increases resulting from tariffs. Realistically, tariffs would have to be obscene to cause wholesale on-shoring and it wouldn’t be economically feasible in the near-term due to a shortfall in demand. Components procured from China are <1/10th of domestic production costs. If we commit to this path, the re-shoring process will have to be gradual and take many years.
Take a look at how this company communicated with its customers about this issue: redacted
In the electronics industry, we – and all of our competitors – have already been paying 25% tariffs on electronic components from China sinceredactedThese costs are passed along to our customers like any other without question because they understand we also need to be profitable to survive. Our customers don’t have a choice if they want to build products and end-users ultimately bear the costs.
Individual competitors may choose to absorb some of these costs and decrease profitability but this applies to any economic/market environment at any given moment in time. The market tends to reach another equilibrium under the new cost model.
On the demand side, increased spending power resulting from reduced income taxes, economic growth, or other vehicles will have to offset cost increases resulting from tariffs. Realistically, tariffs would have to be obscene to cause wholesale on-shoring and it wouldn’t be economically feasible in the near-term due to a shortfall in demand. Components procured from China are <1/10th of domestic production costs. If we commit to this path, the re-shoring process will have to be gradual and take many years.
Take a look at how this company communicated with its customers about this issue: redacted
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by a searcher
1yr ago
in Vancouver, BC, Canada
in Vancouver, BC, Canada
I'm a searcher based in Canada, so my focus is on identifying risk associated with exporting to the US. Also, looking at where the company sources their raw materials and components to see if there's potential for mitigating this risk by sourcing them from the US.
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