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Effect of US tariffs on modular production
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Author Effect of US tariffs on modular production
analogdrummer
I read Moog's release on the coming US tariffs on Chinese goods. Is there similar concern from smaller modular manufacturers in the US? I can't say I know much about the electronics procurement side of the synth business.
slow_riot
Likely there will be, yes. There is a huge reliance on Chinese manufacturing facilities for PCBs in particular, perhaps even complete assembly in some cases.

It's a move from the Trump administration that could have positive benefits, despite the fact that it unfairly penalises the success of another country. I've heard mixed reports about worker conditions in China, some which are critical and some which say those worries are overemphasised. In Europe and the US worker conditions are more protected (for now at least, maybe deregulation is step 2 on the hit list). I'm sure there is an option for manufacturers to explore that involves using local facilities even if the cost is higher.

I doubt component sourcing will be affected because these companies like Mouser/Element14 have facilities on nearly every continent and are quite insensitive to global economics.
analogdrummer
slow_riot wrote:

I doubt component sourcing will be affected because these companies like Mouser/Element14 have facilities on nearly every continent and are quite insensitive to global economics.


That's true, I hadn't actually considered that. How distributed is electronic component manufacturing? As an aerospace engineer, I'm a bit more tuned into metal production vs. electrical parts.
SynthBaron


appliancide
analogdrummer wrote:
slow_riot wrote:

I doubt component sourcing will be affected because these companies like Mouser/Element14 have facilities on nearly every continent and are quite insensitive to global economics.


That's true, I hadn't actually considered that. How distributed is electronic component manufacturing? As an aerospace engineer, I'm a bit more tuned into metal production vs. electrical parts.


It's actually not true. I worked at Digi-Key for several years, and can assure you that those places are not insensitive to global economics. There a lot of things that are made in China that are not made in any significant quantity anywhere else.

This thread is likely doomed to being locked. The main issue being discussed is bad political policy by people only concerned with lining their own pockets. It's kind of hard to have an honest and open discussion about political policy without politics. That's the rules we agree to when we come to Muffs.
analogdrummer
appliancide wrote:
This thread is likely doomed to being locked. The main issue being discussed is bad political policy by people only concerned with lining their own pockets. It's kind of hard to have an honest and open discussion about political policy without politics. That's the rules we agree to when we come to Muffs.


To be clear on my intent, this question came from a place of wanting to educate myself on how international law plays into the economics of modular manufacturing. I fully understand that each company does things differently, and thus the effects will vary person to person. How we personally react to and act on those effects (the politics aspect) will also vary person to person. I wasn't looking to bring those discussions out here - apologies if I have.

Thanks to folks that responded. It's good to hear a few different perspectives on this.
Zymos
Since it only took till the second post for someone to mention Trump....

.....in before the lock! lock

It IS hard to discuss real life economic realities without bringing politics into it.
appliancide
analogdrummer wrote:
appliancide wrote:
This thread is likely doomed to being locked. The main issue being discussed is bad political policy by people only concerned with lining their own pockets. It's kind of hard to have an honest and open discussion about political policy without politics. That's the rules we agree to when we come to Muffs.


To be clear on my intent, this question came from a place of wanting to educate myself on how international law plays into the economics of modular manufacturing. I fully understand that each company does things differently, and thus the effects will vary person to person. How we personally react to and act on those effects (the politics aspect) will also vary person to person. I wasn't looking to bring those discussions out here - apologies if I have.

Thanks to folks that responded. It's good to hear a few different perspectives on this.


It wasn't meant as a criticism of your post, just the reality of these sorts of discussions on here. Paul S's response is probably the best perspective you are going to get from within the industry.
analogdrummer
appliancide wrote:
It wasn't meant as a criticism of your post, just the reality of these sorts of discussions on here. Paul S's response is probably the best perspective you are going to get from within the industry.


Totally understood - no offense taken! I was hoping Paul would chime in. I just hadn't seen his Facebook post yet.
mskala
Having seen how price-conscious synth customers are, I think it probably does mean doom for at least a few small manufacturers doing assembly in the USA. The intended purpose is to encourage people to buy locally-manufactured components instead of importing them from China, which is great except that there aren't any. You can't usefully protect an industry that doesn't exist. Decent-quality basic components simply are not made in the USA anymore, and it's going to take more than a tariff to rebuild that manufacturing infrastructure. Some basic components are made in Mexico - for instance, Vishay does a lot of nice trimmer pots there - which is great as long as NAFTA lasts.

And consumer concerns about working conditions in China really last exactly as long as it takes to read the price tag on items made in places where the workers are treated better and paid more. I remember one of the people quoted above making some pretty ignorant comments about my prices for products made in Canada; everyone would do well to think about why such price differences exist and what we all really care about.

For me personally, as a manufacturer based outside the USA, it remains to be seen whether the effect will be positive or negative. In the past I've mostly bought parts through US distributors. If I do that in the future I may or may not end up paying the tariffs for importing to the USA before whatever it costs to re-import to Canada. If I have to, that's bad. But it may cause supply lines that do not go through the USA to open up more and if so, that'll be a good thing for me.

For those interested in the larger-scale political consequences, bear in mind that if I switch away from US distributors and then the tariffs go away, it's likely that I won't switch back...
ranix
there aren't any because we abolished import/export tariffs and established bad trade deals with foreign nations who have incredibly cheap labor. Therefore all the manufacturers in the USA went out of business due to labor costs

this is what happens when people who don't know shit about anything and just want cheap toys are allowed to fuck up the economy
mskala
ranix wrote:
there aren't any because we abolished import/export tariffs and established bad trade deals with foreign nations who have incredibly cheap labor. Therefore all the manufacturers in the USA went out of business due to labor costs

this is what happens when people who don't know shit about anything and just want cheap toys are allowed to fuck up the economy


I'm not going to comment on why it happened, but I think we agree that it did happen and it's not going to be reversed very soon.
Kent
Yup, it is inherently political and the rules would require that we lock the thread.

However, everyone is conducting themselves nobly like curious adults. Really, any commentary be me just seems patronizing. Let ‘er rip for now.
ranix
mskala wrote:
I'm not going to comment on why it happened, but I think we agree that it did happen and it's not going to be reversed very soon.


it's going to take awhile and the first step is reimplementing import tariffs
realtrance
Here's a brief bit of thinking on why tariffs:

Canada has like a 300% tariff on milk imported from Wisconsin. Why so high? Why at all? Doesn't that prop milk prices up in Canada, and make it more expensive for Canadians?

But think about it a little more broadly: if Wisconsin (and the US) were able to export milk to Canada, Canadian dairy production would soon be wiped out. They simply couldn't keep up with the cheaper import, and would go out of business.

These sorts of "protectionist" tariffs are useful where there are existing businesses in areas that, for one reason or another, want to keep those businesses there, and not buy from elsewhere.

The whole point of "global trade" is more "free-market" in orientation: let prices naturally drive production to where it's cheapest, for whatever reason -- the world's too complex to use controls to balance things without weird consequences -- by dropping tariffs all around.

The imbalances occur when industries and producers in one place get competed out of existence by another. sad banana What do the people who used to thrive by producing X in that area do now??? Are they just left to rot?

Again, similarly, in a "free world labor" market, it would be easy for everyone to just pick up and move to where what they're good at making is being made. If something's made because cheap labor, they move to where the cheap labor is making it, and maybe live on 1/10th the costs of food and housing they used to have to deal with.

Problem with all _that_ is, such movements of production and labor all have negative consequences which are simply ignored. angry

But nobody's come up with a good solution to "buffer" the changes. It usually requires huge outpourings of capital, one way or another, to maintain the reasonable existence of people in areas where their former livelihood has been hollowed out. woah This is why we see either huge government welfare programs, that try to keep things where they are despite it being both an unproductive and now unlivable situation; or huge refugee migrations, which basically force people to move in horrific conditions -- due to the war and poverty and drought and misery of their current arrangements -- to areas where they have more chance to work, which again, initially requires huge outlays of capital to sustain them until change has occurred.

The whole idea of the EU originally was to reduce the "tariffs" against free movement of labor across Europe to where the jobs are; but there was never a reasonable economic underpinning created to make that sustainable. So the equivalent of the US housing bubble happened in the "periphery" nations (Greece, Spain, Portugal, Italy, among others), where banks made huge loans to invest in/subsidize future production potential, but it then ended up being squandered by making those areas even more intensively reliant upon a tourist economy (lots of vacation and retirement building) without helping those countries stabilize and make more heterogeneous their local economies (just a tiny part of the whole problem that was never really solved).

Despite all the shock and craziness of the US housing bubble in the 2004-2008 period -- driven in large part by, believe it or not, China, through the form of both supply of really cheap materials, and massive encouragement of US investment abroad, leaving huge piles of capital around to support massive credit-driven support of the US housing supply -- a form of non-public subsidy, if you will -- what it did do, for a brief period, was make it much easier for labor to move from place to shift to where the work is.

Now, with the collapse of that bubble, we have cities on both coasts that are at the precipice of collapse because nobody who provides the services in those cities can live there any more, thus undercutting overall the property taxes in those cities, thus reducing money for all the services the cities provide, including infrastructure. It's a cycle many US cities have gone through before, cf. New York City in the '70's (after the collapse). The "subsidy" -- neither public nor private -- that would make housing (and food costs, for that matter) possible in those cities, has been prevented, by legislation intended to prevent another bubble and then collapse. Dead Banana

See how complicated it all is? Stagnation is not the answer; tariffs are not the answer, except in some cases, and then it gets complicated really quickly.

At least shaking everything up pressures the need to come up with better answers, instead of playing pretend, like governments have tended to do worldwide for the past 20 years.

At least, that's my perspective on tariffs, ultimately. I don't see any political or economic ideas on any side of the political fence that make good sense in terms of how to figure out how to deal with all this. I just see it as a huge problem that is in urgent need of a solution.

So yes, it's a problem. And the effect on modular production is one, small part of a picture with literally trillions of different parts.

Just some perspective on the tariffs thing.
SynthBaron
realtrance wrote:
Despite all the shock and craziness of the US housing bubble in the 2004-2008 period -- driven in large part by, believe it or not, China, through the form of both supply of really cheap materials...


People here are still discovering they have defective Chinese drywall throughout their entire house and having to rip every single piece of it out.

https://en.wikipedia.org/wiki/Chinese_drywall

The thing is, I don't think modular would be that popular today if most of the components weren't sourced ridiculously cheap from China. A probably all made in the USA component Moog 921 Oscillator cost $680 in 1976, $3000 in 2018 dollars.
analogdrummer
Kent wrote:
However, everyone is conducting themselves nobly like curious adults. Really, any commentary be me just seems patronizing. Let ‘er rip for now.


I'd like to say that I appreciate both the conduct shown and the moderator's tolerance for allowing people to discuss this. I've learned a lot by reading the responses.
realtrance
SynthBaron wrote:
realtrance wrote:
Despite all the shock and craziness of the US housing bubble in the 2004-2008 period -- driven in large part by, believe it or not, China, through the form of both supply of really cheap materials...


People here are still discovering they have defective Chinese drywall throughout their entire house and having to rip every single piece of it out.

https://en.wikipedia.org/wiki/Chinese_drywall

The thing is, I don't think modular would be that popular today if most of the components weren't sourced ridiculously cheap from China. A probably all made in the USA component Moog 921 Oscillator cost $680 in 1976, $3000 in 2018 dollars.


Yep. And the warranty such as it ever was has long run out, and I haven't heard any news yet about China offering free replacements for all defective drywall in America. very frustrating

This is the problem with "global free trade," in my mind (or anything really big, for that matter): it's too complex! It's that simple.

Keeps seeming like more harm than good occurs, long haul, at least the way it's been done so far.

But "control" and "regulation" also fails because if you try to do it on a global scale.....too complex again!!

And if you hand it over to the robots they will quickly end the universe:

https://waitbutwhy.com/2015/01/artificial-intelligence-revolution-1.ht ml

I find that line of argument both highly entertaining and terrifying at the same time. smile
shreddoggie
Excellent thoughtful analysis with deft tightrope skills re: succumbing to bias.
In my attempt to continue your analysis in a fair manner, I refer to the following point which often leads to assumptions I see far too often:

realtrance wrote:

Again, similarly, in a "free world labor" market, it would be easy for everyone to just pick up and move to where what they're good at making is being made. If something's made because cheap labor, they move to where the cheap labor is making it, and maybe live on 1/10th the costs of food and housing they used to have to deal with.


Even if the infrastructure for people moving to the new place where their job has been re-located, it fails to account for the fact that the standards of living in these locations are signifigantly lower. There is a western / entitled delusion that workers elsewhere make lower wages and their lower cost of living somehow makes it equal out. Not by a long-shot. If the cost of housing is 1/10th what it is in the west, not only is it also 1/10th the quality, the wages far lower than 1/10th.

I have been fortunate to spend long periods of my life in such places and know firsthand what goes on. The companies go to these locations not only because the labor is less expensive, but because the labor laws and environmental regulations are non-existent. What you have are maltreated workers living amidst pollution in habitation without indoor plumbing. I have many personal friends in Asia who work such jobs and they cannot afford rice. Yes - rice.

I find it extremely unlikely that the home owning dairy farmer from Wisconsin would give up his flat screen, car, fast food, amazon, and grocery stores to get the 'equivalent' job elsewhere. Talk about complexity.
Joe.
I don't think the tariffs are high enough, If they're meant to facilitate more competition in the component market and make a (majority) domestically produced electronics product viable and competitve.

I really don't think you'll ever see a product, certainly not a Eurorack product, assembled from 100% made-in-one-country products. Except of course if assembled in Asia.

Australia is soon to introduce Food packaging info graphics that show what % of Australian produce are in the product. Perhaps a better solution for the few that actually care? seriously, i just don't get it
SynthBaron
Joe. wrote:

Australia is soon to introduce Food packaging info graphics that show what % of Australian produce are in the product. Perhaps a better solution for the few that actually care? seriously, i just don't get it


"This iPhone manufactured in a suicide net-free facility."
mskala
Joe. wrote:
I don't think the tariffs are high enough, If they're meant to facilitate more competition in the component market and make a (majority) domestically produced electronics product viable and competitve.


Driving the customers for electronic components out of business isn't going to cause more electronic-component factories to exist.
Chopper
SynthBaron wrote:
Joe. wrote:

Australia is soon to introduce Food packaging info graphics that show what % of Australian produce are in the product. Perhaps a better solution for the few that actually care? seriously, i just don't get it


"This iPhone manufactured in a suicide net-free facility."


I giggled.... dunno if i should be ashamed tho...
realtrance
shreddoggie wrote:
Excellent thoughtful analysis with deft tightrope skills re: succumbing to bias.
In my attempt to continue your analysis in a fair manner, I refer to the following point which often leads to assumptions I see far too often:

realtrance wrote:

Again, similarly, in a "free world labor" market, it would be easy for everyone to just pick up and move to where what they're good at making is being made. If something's made because cheap labor, they move to where the cheap labor is making it, and maybe live on 1/10th the costs of food and housing they used to have to deal with.


Even if the infrastructure for people moving to the new place where their job has been re-located, it fails to account for the fact that the standards of living in these locations are signifigantly lower. There is a western / entitled delusion that workers elsewhere make lower wages and their lower cost of living somehow makes it equal out. Not by a long-shot. If the cost of housing is 1/10th what it is in the west, not only is it also 1/10th the quality, the wages far lower than 1/10th.

I have been fortunate to spend long periods of my life in such places and know firsthand what goes on. The companies go to these locations not only because the labor is less expensive, but because the labor laws and environmental regulations are non-existent. What you have are maltreated workers living amidst pollution in habitation without indoor plumbing. I have many personal friends in Asia who work such jobs and they cannot afford rice. Yes - rice.

I find it extremely unlikely that the home owning dairy farmer from Wisconsin would give up his flat screen, car, fast food, amazon, and grocery stores to get the 'equivalent' job elsewhere. Talk about complexity.


I try not to accept the propaganda from any source: "ours,' or "theirs," so I always cast a jaundiced eye on reports of the long-suffering slave laborers in other countries.

BUT: I believe it from people like you, shreddie, and it always breaks my heart to hear it, yet again. But thanks for the thoughtful and informed reply anyways.
paults
OMG SynthBaron is alive??!? Guinness ftw!
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