Manufacturers Cut Spending as Trade War Dents Confidence
U.S. manufacturers are investing less in their factories and workforces as the trade dispute with China makes it more difficult for executives to anticipate costs and demand. The shifting contours of the tariffs that the U.S. and China have applied to each other’s goods are prompting some companies to put business plans on hold. Others are cutting back investments as trade volumes and economic growth slow around the world.
These companies are buying fewer machines for their factory floors and shortening shifts. The knock-on effect means lower sales for those suppliers and less pay for workers, contributing to slower U.S. economic growth. “You have a cloud of dust out there, and you are trying to see clearly through it,” said Paul Reitz, chief executive of heavy duty tire maker Titan International Inc. “It’s tough to do.” Mr. Reitz recently delayed buying new machinery for some of Titan’s six U.S. factories. He said sales could be flat or negative this year, down from the 10% annual growth he expected heading into 2019. He is considering reducing shifts or laying off workers.
Truck maker Navistar International Corp. said Wednesday that it expects to spend $115 million on capital projects this year, down about 25% from its previous forecast after truck orders slowed sharply in recent months. Caterpillar Inc. ’s capital expenditures dropped 16% in the quarter ended in June from that period a year earlier. And Illinois Tool Works Inc. said business uncertainty reduced demand for its welding, measurement and other equipment in the second quarter. The company spent $154 million on additions to its plants and new equipment in the first half of the year, down from $181 million in the first half of 2018.
Some manufacturers see benefits from rising tariffs. Wenger Manufacturing Inc., which makes equipment for producing breakfast cereals and meat substitutes, is getting more orders from customers in countries like Australia and New Zealand that are selling products in China without paying tariffs, said Dennis Funk, a vice president of the Sabetha, Kan., company.
Other companies aren’t changing course as the trade winds shift. “We don’t update our forecast on a tweet-by-tweet basis,” David Burney, financial chief for manufacturer and defense contractor Astronics Corp., told analysts in August. White House spokesman Judd Deere said Mr. Trump is standing up to unfair trade practices that harm U.S. manufacturers.
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https://www.wsj.com/articles/manufacturers-cut-spending-as-trade-war-dents-confidence-11567935002 (paid subscription)
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