Zero Hedge
0
All posts from Zero Hedge
Zero Hedge in Zero Hedge,

Most Americans Are Unwilling To Pay More For "Made In The USA" Products, Poll Finds

President Donald Trump swept into office in November after promising to protect downtrodden American manufacturers by imposing trade barriers that would make US goods more competitive in the US, and around the world.

Yet to the relief of US retailers, Trump has, for now, at least, shelved his threats to impose strict tariffs on Chinese goods – assuming President Xi Jinping follows through with his promise to help the US curb North Korea’s nuclear capabilities. And just yesterday, US Trade Representative Robert Lighthizer 17-page outline of a "tough negotiating strategy" to revise the 1994 North American Free Trade Agreement, meant to reduce trade imbalances with Mexico and Canada. In the early days of his presidency, Trump repeatedly criticized companies – car companies in particular – for moving production outside the US.

But while many blue-collar Americans lament the loss of their once reliable manufacturing jobs, a recent poll by Reuters belies the perception that Americans want to see the shelves of local retailers piled high with goods that were made in the US. To wit: While most Americans support Trump’s “buy American” conceit, few are eager to shoulder the higher costs typically associated with goods both manufactured and sold in the states.

“A Reuters/Ipsos poll released on Tuesday found 70 percent of Americans think it is “very important” or “somewhat important” to buy U.S.-made products.

 

Despite that sentiment, 37 percent said they would refuse to pay more for U.S.-made goods versus imports. Twenty six percent said they would only pay up to 5 percent more to buy American, and 21 percent capped the premium at 10 percent.”

On Monday, Trump released a state-by-state "Made in America Product Showcase" that included AMES wheelbarrows, according to Reuters. Yet at the AMES Companies Inc. factory in Harrisburg, Penn., the wheelbarrows coming off the assembly line once every six seconds cost the company more to there than abroad, but US retailers generally will not charge more for them because consumers would balk, AMES President Mark Traylor said.

Ironically, lower-income Americans were the most enthusiastic about buying US goods, the poll showed, despite being the least able to afford them.

The biggest U.S. retailer is well aware of the priority buyers place on price above all else. A spokesman for Wal-Mart Stores Inc said customers are telling them “that where products are made is most important second only to price.”

Nearly all US manufacturers face the same squeeze.

As Reuters points out, domestic manufacturers could be in trouble if they fail to capitalize on perceptions about the quality of their products while also keeping a tight lid on costs. That perception is American-made goods are sturdier, and tend to outlast and outperform cheap imports.

“We don’t have to be as cheap as imports,” says Traylor, who estimated he sells his wheelbarrows to U.S. retailers for about 10 percent more than importers.

Factors like cheaper domestic freight and a desire among retailers to carry lower inventories can help make up some of the cost differential.

AMES is also better positioned than overseas suppliers to help retailers who need products on short notice. When spring comes early, for example, AMES can respond quickly to ship goods to stores, Traylor said, something importers can't do.

Another strategy embraced by manufacturers is likely to disappoint Trump and his supporters. They might find that, even if Trump succeeds in enticing US firms to move their factories back to the US, that those factories will be staffed mostly by machines, not humans.

“Traylor said another secret to success for U.S. manufacturers is investing in technology to cut costs.

 

AMES, a subsidiary of New York-based Griffon Corp, is pouring $50 million into upgrades at several locations. The Harrisburg factory, built in 1921, is dotted with aged machinery that has been fitted with robotic attachments to reduce reliance on human labor.

 

AMES' annual sales are $514 million.”

AMES told Reuters that it recently convinced a major retailer, who they did not want to identify, to switch from Mexican-made wheelbarrows to carry its products.

The company added that business is so strong it’s hiring 100 employees across its five Pennsylvania locations, including the Harrisburg factory. However, despite its plans to expand, bringing more workers back from overseas could be difficult.

The company said it recently convinced a major retailer, who they did not want to identify, to switch from Mexican-made wheelbarrows to carry their product.

In late April, Trump marked his 100th day in office with a visit to the AMES plant. He asked if every part of the wheelbarrows was made in America. Everything, he was told, except the Chinese-made tires.

That’s because US manufacturers stopped large-scale production of air-filled tires for garden equipment years ago, and the cost of setting up production now would be hard to justify for the low-margin product. Some rubber makers still manufacture solid rubber tires in the US, Reuters reported, but the last time AMES bought any they cost nearly twice the roughly $7 they pay for a Chinese tire, a big added cost for a wheelbarrow that often retails for less than $100.

“Is it feasible to get U.S.-made tires?” asked Mark D’Agostino, the company’s vice president for supply chain. “We don’t know yet.”

To be sure, some manufacturers can command a big premium for American-made products.

“Klein Tools Inc, a privately held company based outside Chicago with annual sales of $500 million, makes hand tools that are highly sought after by electricians and other workers.

 

A pair of 9-inch Klein pliers sells for about 30 percent more than a comparable import.”

But betting on the allure of American-made goods can be risky.

In 2012, High Point, North Carolina-based Stanley Furniture Co brought back production of cribs and other baby furniture from China to a U.S. plant, wagering that parents worried about a string of Chinese factory quality scandals would pay $700 for cribs nearly identical to imports selling for $400.

Customers refused to bite, however, and the High Point factory closed in 2014.

Still, Stanley Chief Executive Glenn Prillaman said the Trump administration’s emphasis on American-made goods is a hopeful sign that resonates with “people that work for a living,” because they can see how it impacts their own jobs.

"The lower-end consumers certainly care, and that’s a good thing,” he said. “But they’re also not in a position to pay the premium.”

The Reuters/Ipsos poll was conducted online in English throughout the US between May 24 and May 31. It gathered responses from 2,857 people, including 593 adults who made less than $25,000 per year, 1,283 who said they earned between $25,000 and $74,999, and 805 people who earned more than $75,000. The poll has a credibility interval of 2 percentage points for the entire group, 5 points for the low-income respondents, 3 points for the middle-income respondents and 4 points for the high-income respondents.