US manufacturing firms expect higher prices from tariffs — ISM

WASHINGTON: Nearly three fourths of American manufacturing firms and half of services companies expect the tariffs imposed by the US and China will prompt them to increase prices, and a large share expect supply disruptions, according to a survey released.

The threats and counter-threats of tariffs on tens of billions of dollars in exports exchanged between the United States and China, as well as between the United States and Europe, have rattled financial markets in recent weeks over fears they could spark a trade war that would derail the global economic recovery.

And Washington does not appear to be much closer to a solution after a high-level US delegation ended two days of talks in Beijing last week without announcing any breakthroughs.

Companies surveyed by the Institute for Supply Management had been reporting rising prices for materials for the past two months, including sharp spikes in steel and aluminium.

And many executives in recent corporate earnings reports also reported seeing rising costs, and were planning to increase prices to consumers.

In its semi-annual economic forecast, ISM said 74 per cent of manufacturing companies and 50 per cent of services firms believed the tariffs would “raise the price of the goods that you produce and deliver to your customers.”

Manufacturers expect an average price hike of 5.4 per cent due to the tariffs, while the services firms put the figure at just over seven per cent, the survey showed.

Meanwhile, close to 60 per cent of firms in both sectors expect “delays and disruptions” in their supply chain because of the tariffs.

This too could lead to price increases and companies have already been complaining about logjams in deliveries, in part because of the lack of truck drivers.

Manufacturing firms already have seen increases of 4.8 per cent in their input costs through the end of April, while services firms have seen an increase of 1.3 per cent.

Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said steel and aluminium prices have jumped 20 per cent so far this year, and the fabricated metals sector has seen the biggest increase in prices paid, with a 10 per cent jump.

In the services sector, the “prices are pretty controlled,” with the exception of fuel-related goods and lumber, Anthony Nieves, chair of ISM’s Non-Manufacturing Business Survey Committee, told AFP. Companies around the country have reported difficulties finding workers to fill open positions and this survey showed 78 per cent of manufacturing companies and 64 per cent of services firms have struggled to hire in the past six months.

ISM reported that about half of those manufacturers had raised wages to attract workers, compared to just a third of services firms.

“We’re struggling finding qualified labour and right quantity,” Fiore said.