In July, Tim Cook met Donald Trump in the Oval Office to deliver a simple message. “Our view on tariffs is that they show up as a tax on the consumer and end up resulting in lower economic growth,” the executive told the President. ”And sometimes can bring about significant risk of unintended consequences.”
Cook ultimately got his way, with Trump giving some of the company’s products a last minute tariff reprieve. Even so, when time came for the company’s latest earnings report, Cook placed much of the company’s relatively weak showing on two-way tariffs and the looming trade war they represent.
The impact of tariffs has been been profoundly wide ranging, impacting everything from solar panels to soy beans. Harley Davidson famously projected costs in excess of $40 million last year. Yesterday, The New York Times noted tumbling sales and stock prices in the washing machine industry, thanks in part to tariffs starting at 20 percent on imported products.
Consumer electronics, which are so often the product of components from wide ranging sources, have been hit with an outsized impact.
“The cost of the current tariffs remains an issue, and the uncertainty of potentially more tariffs combined with export controls is a real threat to our global leadership 5G, artificial intelligence and robotics,” CTA President and CEO Gary Shapiro told TechCrunch. “The tech industry – responsible for 10 percent of U.S. GDP and more than 15 million American jobs – has already been dealt an enormous blow by tariffs this year. Our industry can’t continue to pay $1 billion dollars extra in tariffs every month — tariffs are taxes.”
Over the past several months, manufacturers have been faced with the choice of raising prices or absorbing costs — neither a particularly great option in a volatile economy. This has left Massachusetts-based iRobot, which has been a key driver in consumer robotics, in a difficult position.
CEO Colin Angle told TechCrunch that, while the company has less price sensitivity with its premium priced Roomba devices, the company is still feeling a major crunch.
“The tariffs suck,” said Angle. “In Q4, we absorbed the cost of the tariffs. We did not adjust pricing, and I think we estimated the impact to our profitability for the year at $5 million. In 2019, we, like all of the other manufacturers of robots and most of the manufacturers of consumer goods, have raised the price, because our business model doesn’t allow us to take that hit. What that means is the growth rate of the industry is going to be negatively impacted.”
On the more industrial side, the robotics industry has been hit hard by the rising price of steel imports. “With the tariffs that have recently been placed on a lot of the steel in particular that’s getting imported from China, it puts a lot of pressure not just on Eckhart, but a lot of the companies that we compete against in addition to our customers,” Andrew Storm, the CEO of collaborative robotics maker Eckhart said in a recent interview with Fox Business.
Things have been less pronounced for China-based drone giant, DJI. “We’ve seen some impacts from tariffs on components and miscellaneous gear, but not on our drone business,” a spokesperson told TechCrunch. “We always have to take into account tariffs, currency fluctuations and other factors like that in setting prices for countries around the world, so I don’t want to overstate the impact here. We are monitoring the situation closely, and since we can’t directly affect these trade issues, we’re staying focused on trying to make the best drones people can buy.”
For now, at least, it seems that even a looming trade war with China can’t stop the inevitable rise of robotics and automation — it could, however, serve to hamper its growth.
“The tariffs that we are seeing are having an impact on the manufacturing industries, such as automotive manufacturing, which are the traditional buyers of industrial robotics and automation technology,” IDC’s Research Director covering commercial service robotics John Santagate said in a statement offered to TechCrunch. “There was a bit of a slip in 2018 in terms of orders of robots to automotive manufacturing, but we also saw a significant increase in orders of robots in other industries. The growth of robotics in other industries is showing strong growth, that will likely continue regardless.”