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President Trump Says Tariffs Will Remain Until China Complies with Deal: President Trump said he intends to keep tariffs on China until he’s sure Beijing is complying with any trade deal, negating expectations that the two nations will agree to roll back duties as part of a lasting truce to their trade war. The president’s position dims hope that round-the-clock trade negotiations between the world’s two biggest economies could lead to them removing the roughly $360 billion in tariffs they’ve imposed on each other’s imports. Beijing has been pushing the Trump administration to remove tariffs as part of any deal.

U.S. officials are concerned that Beijing is pushing back against some American demands in trade talks. Chinese officials have shifted their stance because after agreeing to changes to their intellectual-property policies, they haven’t received assurances from the Trump administration that tariffs imposed on their exports would be lifted. Despite his comments on the tariffs, Trump said, “the deal is coming along nicely”. A deal still remains more likely than not as it’s in both sides’ interest. One of the remaining sticking points in talks is whether the tariffs would be lifted immediately or over a period of time to allow the U.S. to monitor whether China is meeting its obligations. The U.S. wants to continue to wield the threat of tariffs as leverage to ensure China won’t renege on the deal and will only lift the duties fully when Beijing implements all parts of the agreement. On April 11, the Chinese Foreign Ministry spokesman said that trade talks with the U.S. are “moving forward” and that “new substantial progress” has been made. That comment came after three days of talks in Washington the prior week that dealt with issues including technology transfer, intellectual property rights protection, non-tariff measures, agriculture and enforcement of agreements. The U.S. and China have conducted nine rounds of consultations aimed at ending a standoff that has shaken the world economic outlook.

Five Manufacturing Trends to Watch in 2019: Steady industry growth marked a trend for manufacturers in 2018. According to a recent Forbes report, U.S. manufacturing has rebounded since the Great Recession, with an increase of 1.1 million jobs over the last eight years. Those numbers are expected to climb in 2019 as new technologies and innovations continue to create manufacturing jobs. According to a report by the McKinsey Global Institute, U.S. manufacturers could boost their overall value by 20% — up to $530 billion — by 2025. However, the industry as a whole, including small and medium-sized manufacturers (SMMs), must take advantage of newly available technologies and processes to achieve those numbers. A number of hot opportunities they should keep their eye on in 2019 are as follows:

Additive Manufacturing Additive manufacturing, often referred to as 3D printing, is defined as the process of joining materials to make objects from 3D model data. It is playing an increasingly important role in the manufacturing industry and is mainly used in toolmaking and prototype construction. Advancements in additive manufacturing processes can help SMMs reduce energy costs, limit waste, and boost production. In addition, these technologies are becoming increasingly affordable.

Collaborative Robots The Robotics Industries Association (RIA) defines collaborative robots, also known as “cobots,” as robots specifically designed to work side-by-side with humans within a defined collaborative workspace. Along with additive manufacturing, cobot technology can be a formidable ally for SMMs trying to compete with larger operations. The RIA predicts cobot sales will reach $34 billion by 2026 as more and more manufacturers take advantage of this technology.

Smart Manufacturing Smart manufacturing refers to the practice of making information about manufacturing processes available when and where it is needed, in the form it is needed, so that smart decisions can be made about the course of critical business operations. With machine learning and analytics now more readily available, manufacturers can use smart manufacturing to improve productivity and efficiency; technology alone won’t grow a business. Manufacturers should establish long-term and short-term goals for business growth, set margins to measure that growth, and only then determine what type of machines and technology they need to reach those goals.

Cybersecurity Thanks to readily available cybersecurity guidelines, SMMs that don’t have a cybersecurity plan can start to protect their operations and their customers’ confidential information. The time has come to start to address these vulnerabilities. The Defense Federal Acquisition Regulation Supplement provides some “basic” information system security controls, and defines key terms such as “adequate security,” “proprietary information,” and “controlled technical information.”

Workforce Development Technology advances offer numerous opportunities for the future of workforce development. Employees who used to do repetitive assembly or inspection tasks taken on by robots are advancing their careers into higher-level positions that require problem-solving skills. At the same time, manufacturers still need a large number of skilled workers to fill job openings. According to a recent study from Deloitte and The Manufacturing Institute, skilled production, digital talent, and operational management positions may be three times as difficult to fill in the next three years, with 2.4 million positions in manufacturing going unfilled between 2018 and 2028. Manufacturing engineers will be in high demand in 2019 to perform cost benefit-analyses, solve production issues, and operate CAD software to design and produce products and systems. Digital twin engineers, who manage communication networks between the physical and digital worlds throughout the manufacturing value chain, are also expected to be in high demand.

In summary, while 2019 promises to be an interesting year in manufacturing, all of the above opportunities represent facets of the larger dynamics that will shape manufacturing in the decades to come. The fact is, we’re in the midst of an industrial revolution that is changing how products are designed, fabricated, used, and serviced. The implications are especially favorable for smaller manufacturers, as the means to achieve increased productivity and profitability have never been more accessible.

Boeing Races Ahead with 737 Max as Financial Risk Deepens:Boeing will soon learn whether the financial fallout from the global grounding of its best-selling jetliner will be a brief jolt or a much more painful ordeal with repercussions for suppliers and the U.S. economy. Production of the 737 Max has continued at full tilt even though regulators grounded the jet following a March 10 crash, the model’s second fatal accident in five months.  Subcontractors have even begun to speed up the manufacturing pace for the 600,000 parts that go into each one of the planes, Boeing’s largest source of profit. For now, the company and its suppliers are sticking to a carefully planned schedule, which predates the disasters, to raise monthly output to 57 jets by midyear. That’s about 10% higher than the current pace, which is already a record. However, if regulators take their time in certifying the Max’s return to the skies, Boeing would be forced to stash hundreds of new jets in airports across the Western U.S.

Boeing has several production options for the 737. It could postpone the rate increase and perhaps freeze share repurchases to preserve working capital. If the grounding extends late into the year, the company could slow work at its 737 factory in Renton, Washington, as it did twice following the September 11 terrorist attacks. The worst-case scenario would involve temporarily halting production. That would resonate through the economy.  According to JPMorgan Chase & Co., the resulting layoffs and lost sales would ripple down to machining shops and other small businesses thereby shaving 0.15 percentage points off this year’s U.S. gross domestic product.  A swift return to normal looks increasingly unlikely for the Max.  Boeing engineers are still finishing work on a software update for a stall-prevention system. On April 1, Boeing said that it would be several weeks before the software patch is submitted to regulators who vowed a rigorous review. If U.S. regulators agree that the software upgrade resolves safety concerns, they might lift the grounding while foreign reviews are still underway — relieving some of the pressure on the Boeing and its suppliers. For each month the Max is idled, Boeing faces estimated losses of $1.5 billion to $2.7 billion. There’s a silver lining if Boeing postpones the accelerated production pace. That would grant a reprieve to suppliers still struggling to meet the 52-jet monthly schedule Boeing adopted last year.

While Boeing’s market value decreased more than $30 billion in the aftermath of the Ethiopian crash, the selloff appears greater than the estimated actual cost to Boeing, or the market share likely to shift to Airbus SE, said Carter Copeland, an analyst at Melius Research. While Lion Air has threatened to cancel orders, other prominent buyers such as Southwest Airlines Co. have expressed support. “Boeing has a lot tied up in the 737, but so do its customers,” said JPMorgan Chase analyst Seth Seifman.  “They’re not going away.”

Consumer Confidence Remains High in the U.S.:  According to preliminary figures published by the University of Michigan, consumer confidence in the U.S. cooled down slightly in April as the positive impact of recent tax cuts faded away. While consumers remain very positive about current economic conditions, looking ahead they are slightly more worried than a month ago, resulting in a 3.4% percent drop in the Index of Consumer Expectations. Despite the small setback, confidence remains high overall. After a brief worsening of consumer sentiment due to the government shutdown in January, confidence was promptly restored thanks to rising incomes, low inflation, plentiful jobs, and low unemployment. The importance of consumer optimism and confidence is widely recognized, as high confidence typically boosts private consumption, a key driver of economic growth. As the University of Michigan explains: “Economic optimism promotes consumer confidence and a willingness to make large expenditures and debt commitments, while economic uncertainty breeds pessimism and a desire to curtail expenditures and rebuild financial reserves. When many people change from an optimistic to a pessimistic view of economic prospects at the same time, it has been repeatedly found that a widespread shift toward postponement of expenditures follows. It is in this manner that the economic optimism and confidence of individual families exert their influence on the course of the aggregate economy.”

Manufacturing Industry Outlook

The performance of the U.S. manufacturing industry continues to be strong amidst a number of dynamic forces shaping the market, including an uncertain trade relationship with China, skilled talent shortages, and straining supply chains. Heading into the final year of the decade and the tenth straight year of economic expansion in the U.S. economy, the industry finds itself in a unique position. On one hand, manufacturing is firing on all cylinders: output is humming, capacity utilization is up, and many manufacturers are delivering solid performance results and shareholder returns. On the other hand, trade tensions lurk in the background and supply chains are straining to keep up with demand, while skilled talent is in short supply and threatening to derail the current industry momentum. In the middle of these headwinds is an underlying move toward digital and advanced technologies that are transforming not only business operations but also partner ecosystems and even business models. Digital holds tremendous potential and is likely to be decisive in determining the fate of industrial manufacturing companies in the months and years to come.

This article appeared in the November 2018 issue of “Modern Machine Shop”. This information indicates the market for new machine tools, primarily CNC machinery, is healthy and that we can expect to see pricing levels for new machines to be supported by the manufacturers and the market.

According to Irontrax sources the value of used machine tools, and other industrial equipment, will be supported by the increased demand for new equipment. The values of newer machine tools will hold steady while the demand and value of older machines, more than eight years old, will suffer as newer technology and efficiencies will prevail.

Gardiner Intelligence, the research arm of Gardner Business Media, has released the 2019 Capital Spending Survey, which projects accelerating growth for the machine tool market next year. In it, Gardner Intelligence sees machine tool consumption increasing 11 percent to $7.748 billion in 2019, following smaller growth in the preceding two years. In 2018, machine tool prices rose, and delivery times lengthened, a trend that is likely to continue given the planned spending by machine shops detailed in the report. Gardner Intelligence is forecasting an 11-percent increase in U.S. machine tool consumption in 2019. This represents a $7.7 billion increase, with smaller manufacturers driving growth.

Significant Spending Trends

In 2019, job shops are projected to spend roughly $2.2 billion on machine tools, more than twice as much as any other end market. The machinery/equipment and automotive end markets plan to spend roughly $1 billion apiece next year. Job shops, machinery/equipment and automotive, which are the top three industry end-market categories, will account for approximately 60 percent of machine tool consumption. Planned spending in aerospace, pumps/valves/plumbing products, electronics/computers/telecommunications products, and forming/fabricating (non-auto) industries should slightly exceed $400 million. These seven industries combined are projected to consume nearly 80 percent of all machine tools purchased in 2019.

This year’s Capital Spending Survey also projects increased spending on every one of the six major machine types tracked by the survey. Growth in turning-equipment spending is highest with a projected increase of 56 percent. The full report provides a complete breakdown of machine sales by machine type, plant size, region and industry. Regionally, the biggest surprise is the Southeast. Shops in the Southeast plan to spend nearly $1.2 billion on machine tools in 2019, more than 50 percent higher than any previous year for the region. The region’s increased spending is due to very large increases in Aerospace and Automotive spending.

Small Shops Drive Growth in U.S. Machine Tool Market

But what is driving the accelerating growth, higher prices and longer delivery times of machine tools? A good place to start is with the old economics maxim: “Prices are set at the margin.” For the machine tool industry, the marginal buyer is best identified by facility size, as small shops typically buy sporadically and only when they have cash or profits to spend. In 2019, shops with 50 to 99 employees and those with fewer than 20 are projected to spend more on machine tools next year than any other year in the last decade, and they will probably spend more than any other year in the past two decades. Therefore, these smaller shops are projected to drive the machine tool market to its highest level since 2000.