by Amro Shanshal | June 19, 2018
Additive manufacturing is growing rapidly in the 21st century, and it is reshaping how we look at the conventional manufacturing methods. A variety of companies are utilizing additive manufacturing technology, however, the cost of implementing and using this technology can get expensive. Proposed tariff increases will likely have an influence on the cost of many manufacturing processes, including additive manufacturing.
On March 18, 2018, the United States Department of Commerce announced a new tariff on aluminium and and steel. Aluminum would be taxed at 25%, while steel is at 10%. Recently, NAFTA has been added to the tariff, which could hinder an already difficult NAFTA negotiations. In fact, Canada, China, India and already imposed tariffs on US goods in response to the American decision to place tariffs on aluminum and steel.
The Canadian tariffs will go into effect July 1, and it includes a wide range of items. The highest is 25% tariff on unfinished iron and steel products, while others, including many consumer products, will be at 10%. The full list of good can be found in . China will face 25% to roughly $50 billion worth on their goods. The US trade representative’s office said the focus will be primarily on industrial goods, which include industries such as aerospace, information and communications technology, robotics, industrial machinery, new materials, and automobiles. In response, China is imposing 25% tariffs on many US goods, including food products, car engines, aircrafts, electric cars, medical equipment and energy products . All these industries are increasing their use of additive manufacturing, so these tariffs could make things worse for the additive manufacturing industry. Businesses have to adapt to unexpected changes in the industry and be ready to tackle the issues such as consumer needs and economic aspect.
The added tariffs could force some businesses to advance their products research and accelerate their automation while finding ways to reduce materials cost. Luckily, the Research & Development Tax Credit gives advantages to businesses who are willing to spend money on improving their products and manufacturing processes through research. Therefore, businesses who would invest in additive manufacturing research may be eligible to utilize this tax credit.
The permanent Federal Research and Development (R&D) Tax Credit established in 1981 offers a tax credit that ranges from 4%-7% of eligible spending for researching methods to improve manufacturing and products . On December 18, 2015, President Barrack Obama signed the PATH Act, which makes the R&D Tax Credit permanent, with a few exceptions. The R&D credit can used to counteract Alternative Minimum tax for companies who generate a revenue less than $50 million and for pre-profitable startup businesses who can receive up to $250,000 per year in payroll taxes and cash refund .
There are companies that benefited from the proposed tariffs such as Nucor, and Alcoa. Nucor is a US-based steel company, and they are the largest producer of steel in the US, producing around a volume of 15 million tons a year. Nucor stock prices showed a hike since the tariff announcement was made, although the tariffs were not applied yet. This event indicates that news can significantly alter how the market behaves. In fact, some companies try to take advantage of not yet enforced regulations to make money. Nucor is currently investing in additive manufacturing technologies to to see if they could find cost effective alternative to their conventional methods, to save on material cost.
Conversely, there are companies who could get affected by the tariffs. For example, Boeing, the nation’s largest single exporter uses steel and aluminum parts to manufacture planes. In addition, Ford uses steel and aluminum in car production, can also be affected. Ford stated that the tariffs could impose an increase in domestic commodity prices. To potentially reduce the effect of tariffs, Ford is investing in Desktop Metal, a 3-D printing start up. Desktop Metal can rapidly produce 3D printed parts made out of steel, aluminum, and many other alloys. Ford is hoping that their $65 million venture investment could overcome many issues, those are not limited to printed objects are ready to use out of the furnace. This is good news for the additive manufacturing industry, especially that ING predicted that 50 percent of manufacturing goods will be 3D printed by 2060.
One way for companies to get around the potential spike in prices of raw materials is through investing in 3D printing technology. 3D printing cuts down on material cost and reduces waste in comparison to conventional manufacturing methods such as casting, forging or CNC machining. Impacted companies can implement the R&D Tax Credit to get tax breaks, advance their technology, and expand by hiring more US workers.
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