Tariffs bring added costs for Kimball ElectronicsJuly 31, 2018
By LEANN BURKE
JASPER — Facing rising costs due to a slew of tariffs the Trump Administration imposed on imports coming to the U.S. from China, Kimball Electronics issued a letter to the Office of the U.S. Trade Representative outlining concerns that the tariffs could cause the company to close one or two of its four U.S. manufacturing plants and move more manufacturing outside the U.S.
In the letter, which was sent ahead of Kimball Electronics officers’ visit to Washington, D.C. on July 24, Kimball Electronics CEO Don Charron urged the USTR to remove the tariffs from a handful of goods Kimball Electronics imports for its U.S. manufacturing and explained that while Kimball Electronics is dedicated to manufacturing in the U.S., it cannot absorb the additional costs imposed by the tariffs.
Charron also said that many of Kimball Electronics’ customers will likely ask for production of their goods to be moved to the company’s Mexico plant to cut costs.
Of the 39 customers Kimball Electronics serves from its U.S. plants, the letter said, the company expects at least 13 of them to ask Kimball to move their production in the next 18 months.
These 13 customers represent approximately 75 percent of the annual revenue for U.S. manufacturing locations.
“If this happens, Kimball Electronics will be forced to close one, and possibly two, of its U.S. manufacturing operations,” Charron wrote.
Between its four U.S. plants — located in Jasper, Indianapolis (two plants) and Tampa, Florida — Kimball Electronics employs 1,000 Americans and generates roughly $300 million in annual revenue.
The letter cites a few major reasons Kimball Electronics cannot quickly adjust its business practices to fend off the effects of the tariffs.
One of the reasons is that some of the parts Kimball Electronics’ American manufacturing plants use are only produced in China, though the companies that produce the parts are not Chinese. Even if there were domestic substitutes, the letter states, Kimball Electronics still would not be able to quickly change practices to respond to the tariffs due to its lengthy qualification process for its parts and worldwide shortages of the parts that already often cause 40 to 52-week lead times.
“The safety and quality of our component parts is literally a matter of life and death,” the letter said. “These parts go into medical life-saving devices and critical automotive applications such as anti-lock braking and electronic power steering.”
The letter also states that Kimball Electronics is a “critical supplier” to the automotive industry and that a disruption in Kimball Electronics’ production could “easily shut down vehicle supply lines in the United States.”
Kimball Electronics isn’t the only electronics company feeling the effects of the Trump Administration’s trade war, which began with a Trump Administration belief that the U.S. gets a bad deal in world trade and includes tariffs against goods coming from several countries including China, the European Union, Canada and Mexico An article from “Circuits Assembly,” an industry magazine, cited several electronics companies struggling with increased lead times and higher costs as a result of the tariffs.
The tariffs have challenged other industries as well. Tariffs on European steel and aluminum affect the construction industry and are likely to push prices up. Locally, the City of Jasper and the Jasper Public Library have to take the higher prices into consideration when planning the Thyen-Clark Cultural Center. Another effect of the steel and aluminum tariffs for Indiana is expected job loss. An analysis earlier this year from Ball State University estimated a loss of 1,647 manufacturing jobs in Indiana due to steel tariffs.
Farmers are also seeing negative effects of the trade war as Chinese tariffs on American soybeans and pork cause a large price drop. The effect has been so great on farmers that last week the Trump Administration suggested a $12 billion aid package to alleviate the effects of its actions.
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