August Supply Chain Roundup: Tariffs, Investments and Manufacturing Trends
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The dog days of summer were in full swing in August, but that didn’t slow the pace of supply chain news and announcements. From big tech expanding U.S. manufacturing to automakers securing critical materials, the month underscored just how much investment and attention the world’s supply chains are getting right now.
The shifting tariff situation, new geopolitical concerns and economic uncertainty also continued to impact the global supply chains in August. Some companies faced higher costs at the border, for example, and are also dealing with volatile overseas markets and pressure to adapt new sourcing strategies
One of the biggest developments happened on August 29th, when the loophole that allowed merchandise worth less than $800 to enter the U.S. duty-free was eliminated. According to The Washington Post, the de minimis rule was put in place more than 90 years ago. Now, importers must pay a tariff rate ranging from 10%-50%, depending on their country of origin.
Consumers may feel the impact pretty quickly. “I don’t know that consumers are really understanding the impact this will have,” ePost Global’s Alison Layfield told the publication. “Consumers are really going to have some sticker shock.”
Businesses and transportation providers are also bracing for the impacts, which so far have included a temporary “stop” on certain shipments to the U.S. as the customs clearance procedures and other details are more clearly defined.
CNN says postal companies, in particular, are feeling the strain of the de minimis rule elimination. US Customs and Border Protection estimated that more than 1.36 billion de minimis shipments entered the country last fiscal year, it reports, and the agency processes more than 4 million de minimis shipments each day.
Partnering to Secure Rare Earth Magnets
As trade policy changes were stirring up uncertainty at the border in August, other headlines signified new investments aimed at strengthening domestic supply chains. One example came early in the month when General Motors and Noveon Magnetics announced that they would be partnering to secure U.S.-made rare earth magnets.
Under the multi-year agreement, Noveon is delivering rare earth magnets to support GM's full-size SUVs and trucks. “We’re proud to be delivering critical rare earth magnets in support of some of America’s most iconic vehicles,” Noveon’s CEO Scott Dunn said in a press release announcing the new alliance. “This agreement is a testament to what American manufacturers like GM and Noveon can do to develop supply chains and partnerships right here in the U.S.”
Noveon is the only operational manufacturer of sintered NdFeB rare earth magnets in the U.S., but this new partnership is about more than just securing parts for GM. Jeff Morrison, global CEO, says sourcing magnets from a U.S. manufacturer strengthens GM’s supply chain against global disruptions while supporting domestic jobs and economic security.
“Working with domestic manufacturers like Noveon allows us to increase the resiliency of our supply chain while supporting American jobs and strengthening our industry and economic security,” Morrison said. “Noveon’s magnets will support our most popular vehicles and help continue to deliver a leading portfolio of choice for our customers.”
Strengthening the Domestic Supply Chain
Also in August, Apple announced new investments aimed at strengthening its U.S. supply chain. The company added $100 billion to its existing commitments, bringing the total to $600 billion over the next four years. At the center of the plan is the American Manufacturing Program, which focuses on expanding domestic production of key components and reducing exposure to global disruptions. Partners include Corning, Texas Instruments, Samsung and GlobalFoundries, all of which contribute to Apple devices sold worldwide.
Apple says the program will fund projects like an expansion of Corning’s Kentucky glass plant, which will produce cover glass for iPhone and Apple watches. Apple also signed a multiyear deal with Coherent to supply lasers from its Texas facility and deepened its agreement with MP Materials to provide U.S.-made rare earth magnets.
“Today, we’re proud to increase our investments across the United States to $600 billion over four years and launch our new American Manufacturing Program,” said CEO Tim Cook in a press release. “This includes new and expanded work with 10 companies across America.”
Domestic Manufacturing Continues to Contract
In manufacturing news, the U.S. ISM Manufacturing Index dropped one point to 48.0 in July, which ISM says was “well below the market consensus forecast for a modest improvement to 49.5. Seven of 18 industries reported growth for the month, down slightly from nine in June. As well, 79% of the sector’s gross domestic product (GDP) contracted in July, up from 46% in June.
The report was a mixed bag, with two of the five key sub-indicators improving on the month and three deteriorating, ISM reports. The new orders index recorded a modest improvement (up 0.7 points to 47.1), while the production index edged modestly higher into expansionary territory (up 1.1 points to 51.4).
“The deterioration in today’s ISM report keeps intact the broader narrative of a sluggish manufacturing backdrop amidst elevated trade uncertainty,” the organization said in the report, which was released in August. “The details of the report reinforce this view, with employment, inventories, and new orders holding in contractionary territory for several months now, and 'supplier deliveries' also joining the group last month.”
