The print industry is experiencing many changes, including the growing demand for mass customization and increased competition from an increasingly digital landscape. While the forecasts for digital printing are positive in many segments, and competition from other channels is a relevant concern in many segments of print, there is another factor that has the potential to influence profitability and revenue growth: tariffs.
The United States is in the midst of complicated trade negotiations, resulting in a series of new tariffs on imported goods from specific countries. While the print industry should not be concerned with all these tariffs, one in particular has the potential to impact print service providers (PSPs) that use lithographic printing plates.
Understanding the Aluminum and Steel Tariffs
Tariffs are nothing new. As a part of a legislative act passed in 1962, the President of the United States is granted the power to impose trade restrictions on foreign powers under a defined set of circumstances. The current administration began levying tariffs in early 2018, with a 10% aluminum and 25% steel tariff. This tariff originally only applied to certain countries, like China, but was expanded in March 2018 to include Canada, the EU, and Mexico.
This expansion began to impact pricing on print commodity items like printing plates, as well as hardware components used in building and repairing printing equipment. Many PSPs get their lithographic plates from the EU due to the quality of their materials and their ability to produce high-end printed products. As a result, companies like Agfa, Fujifilm, Southern Lithoplate, and Kodak are among those affected. They began passing along price increases during late 2018.
These organizations are currently requesting exemption from the tariffs, with Kodak and Fujifilm being granted a one-year exemption at the end of January 2019. It should be noted that some US-based steel and aluminum manufacturers are counter-petitioning the government to keep companies impacted by the tariffs, as this has created a business growth situation for them.
The Evolving Nature of Tariffs
Tariffs are a complicated external factor that can impact market stability. The lifespan is different for each tariff, and some have already ended. This includes a tariff on uncoated groundwood imported from Canada, which adversely impacted the US newsprint industry. Removal of the tariff was petitioned by a number of forces, including the Printing Industries of America (PIA), and overturned.
Many of the forces behind the repeal of the Canadian tariff are currently pushing for the ease of the steel and aluminum trade restrictions but, to date, have been ineffective. Lisbeth Lyons, PIA’s Vice President, Government & External Affairs, has cautioned that the Canadian uncoated groundwood victory was an uncommon development, and that PSPs cannot reasonably expect the steel and aluminum tariffs to be resolved so quickly.
Unfortunately, progress on trade negotiations between the US and the EU is slow. In October 2018, one EU official said that trade talks had not even reached the “pre-work” stage. Since then, no major milestones have been reported. Given this static nature, PSPs cannot expect a resolution to the steel and aluminum tariff situation in the near future – at least not as it relates to the EU. For now, the tariffs remain a shaky reality that is expected to impact the US print industry in 2019.
Colin McMahon is a Research Analyst at Keypoint Intelligence – InfoTrends. He primarily supports the Business Development Strategies and Customer Communications advisory services. He creates or refines much of InfoTrends’ content, including forecasts, industry analysis, and research reports. He also assists with the editing and formatting process for many deliverables.
This article originally appeared in the March/April, 2019 issue of Mailing Systems Technology.