EMS@C-LEVEL
As Forbes, Entrepreneur, Fast Company and SCOOP writer, Philip Stoten, continues to talk to EMS (Electronic Manufacturing Services) executives he learns more about their individual and collective experiences and their expectations for their own businesses and for the entire electronic manufacturing industry.
EMS@C-LEVEL
EMS & The Economist: Liberation Day Shockwaves, Tariffs and Global Trade Disruptions
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The economic landscape once again shifted dramatically with the White House's "Liberation Day" announcements, and Shawn DuBravac, Chief Economist of IPC, brings clarity to the chaos. His analysis reveals how the newly announced tariffs - including a surprising 46% on Vietnamese goods and 34% on Chinese imports - are already causing companies to pause production, announce layoffs, and rethink their supply chains.
What makes these tariffs particularly disruptive is their timing and scope. Vietnam had emerged as a key alternative to China for electronics manufacturing, capturing 27% of US laptop imports compared to China's 66%. Now, those diversification efforts face severe headwinds. Shawn estimates laptop prices could surge by as much as 48%, a cost neither manufacturers with their tight margins nor financially-strained consumers seem prepared to absorb.
The conversation takes a concerning turn when discussing recession probability. While the US economy was on solid footing before these announcements, Shawn notes the probability of a 2025 recession continues to rise with these policy announcement. Consumer sentiment was already weakening with Americans "spending everything available to them." The timing creates a potential economic storm: short-term panic buying followed by significant demand contraction as prices rise.
Mexico and Canada emerge as potential winners due to USMCA exemptions, while European manufacturers face difficult decisions about their US export strategies. Companies are responding with various approaches - 31% investing in automation, nearly 30% switching suppliers, and 60% attempting to push costs upstream through renegotiated contracts. Meanwhile, 18% have already announced hiring freezes with another 36% considering similar measures.
Join us for this critical and timely conversation about global trade realignment, manufacturing strategies, and how organizations like IPC are evolving to provide both global and region-specific insights during this period of economic uncertainty. The landscape is changing daily - understanding these shifts has never been more important for anyone involved in global manufacturing and supply chains.
EMS@C-Level is hosted by global inspection leaders Koh Young (https://www.kohyoung.com) and Global Electronics Association (https://www.electronics.org)
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Tariff Concerns and Market Sentiment
Philip StotenHello from my house to yours . Welcome to EMS and the Economist . I'm with Sean Dubravak , Chief Economist of the IPC . Sean , pleasure to chat to you . Nice to see you a couple of weeks ago at Apex .
Shawn DuBravac, Chief Economist of IPCYeah , great , great to see you at Apex and great to see you again .
Philip StotenI guess , like me , you spoke to a lot of people there . One of the things we obviously elephant in the room that we should start with today is probably tariffs . Of the people I spoke to there , there didn't seem to be specific tariff concerns in terms of what the numbers will be . There just seemed to be a concern that we're in this stage of turmoil where their customers can't make decisions , capital equipment investors can't make decisions and there's that whole slowing down . Was that a sense of what you got at Apex ?
Shawn DuBravac, Chief Economist of IPCwhen you talk to people , yeah , I think that was definitely . The general sentiment was that you know , any tariffs were just going to pass forward any price increases and at the time we were looking at the potential for copper price tariffs copper tariffs we were looking at things like which still could come , things like aluminum and steel , and just the general sense that any price impacts from tariffs would just be passed forward . You know , any price impacts from tariffs would just be passed forward . That there was this feeling of malaise starting to sit over executives and just you know , what is not unique to our industry but unique to , I think , the current environment is just the dour sentiment you see among executives trying to figure out the environment . I do think things have changed a little bit this week with the liberation day .
Shawn DuBravac, Chief Economist of IPCYeah , with liberation day and all of the tariffs . One certain uncertainty is much higher now because there's still a lot of unknowns when it comes to translating what was released by the White House and what actually needs to be implemented within supply chains what's included , what's not included , what tariff rates will be . So I think a lot of company executives are still trying to figure out exactly what the implications are , because it's not totally clear to them . And then clearly , you know , I think just sentiment took another step down as confidence continues to erode .
Philip StotenYeah , and when you look at the list of tariffs , some of the standouts that surprised me were 46% on Vietnam . Vietnam was seen as a good option for companies moving out of China and currently they have a higher tariff than China at 34% , and the claim tariff charge on the US is 90% . When you look at those , they talk a lot about balancing the trade deficit . When you look at those claim tariff charges , do they make sense ? Are they ? What tariffs are being charged on US goods in those countries ? I'm surprised that Coca-Cola in Vietnam is attracting a 90% tariff . It seems to be selling pretty well everywhere around the world .
Shawn DuBravac, Chief Economist of IPCI think there's still a lot of uncertainty about how the USTR , which is the agency that helped derive those numbers , how they came up with the numbers . There's a lot of second guessing how those numbers were derived and , you know , there's still a lot of uncertainty about what might happen over the next week . Some of those , you know tariffs don't go into effect for a few days , and so there's still this little window that could change . And yet , as an organization , you really have to move forward , with the presumption that this is the new reality . And so I , you know I noticed likewise the impact of the high tariffs on Vietnam goods that could have that ripple effect on
Liberation Day and Immediate Impacts
Shawn DuBravac, Chief Economist of IPCelectronics .
Shawn DuBravac, Chief Economist of IPCWhen you look at a couple of categories , you see things like laptops , where in 2024 , about 27% of the laptops coming into the US were coming from Vietnam .
Shawn DuBravac, Chief Economist of IPCLaptops coming into the US were coming from Vietnam and that's obviously been a big shift in the last four or five years as companies looked to diversify away from China .
Shawn DuBravac, Chief Economist of IPCChina is still the bulk of laptops coming in the US , at about 66% , but you have seen that decline pretty significantly while you've seen other countries like Vietnam increase .
Shawn DuBravac, Chief Economist of IPCNow , with these very high tariffs on things like laptops , I think you'll have companies that are really going to have to reconsider where they're producing and what they're importing into the US , because it will become cost prohibitive to sell these unless you see the whole thing . You know the whole tariff amount passed forward and consumers willing to pay for it , but I don't see a US consumer that's well positioned right now to afford higher costs , especially on something like a laptop . If the price were to go up you know , by my estimate , just under 48% on average because of these tariffs , it's hard to imagine that consumers are ready to absorb that price and at the same time , I don't think that companies can absorb that full amount , given how tight margins are on some of these product categories . So I think it , you know , we will likely see prices go up and , as a result , we'll likely see demand come down for a number of these products .
Philip StotenYeah , and also much as the situation with capital equipment sales being impacted , as people don't know where to go . If you're looking at upgrading your laptop , the chances are you're going to wait and see a substantial amount of time because you're not going to want to pay certainly a 48% hike and then you know . The other factor is you're looking at the bill of materials for a product , even a product that's finished and assembled in the US . In the US , much of that supply chain is coming from overseas and Taiwan , with 32% tariff on a lot of the larger semiconductors that are in there , the more important semiconductors .
Shawn DuBravac, Chief Economist of IPCChina , with 34% , with a lot of the lower cost parts on the bill of material . That's going to have an impact even on goods that are made in the US . Yeah , definitely , and you know , you definitely will see that even goods in the US will rise , and I think they rise really for twofold First , as you noted , because the component prices have gone up . But also we know that tariffs generally allow domestic producers to raise their prices to a point where they're you know they're able to take advantage of those higher import prices and raising their own prices and it makes them slightly more competitive .
Shawn DuBravac, Chief Economist of IPCSo it isn't just that tariffs exclude imports and make it easier for domestic companies to compete , but it also is an environment where domestic companies tend to raise their prices . You've already seen that in things like steel , where domestic steel producers have raised their steel prices to a point where that makes it more profitable for them , and my sense is that you would probably see the same thing in a number of these categories , Even if they were fully manufactured in the US .
Vietnam, China, and Consumer Electronics
Shawn DuBravac, Chief Economist of IPCThe domestic producers will be able to raise prices and in some instances , as you noted , they'll have to raise prices because the component prices are up . Yeah .
Philip StotenAnd what about the nearest neighbor , mexico , were very present , as they always are at Apex . They were probably the people that were most concerned about tariffs . They were probably the people that were most concerned about tariffs . They have an industry that's dependent on what has been a very good trade partnership . What do you think the impact of this week has on those ? Same position they thought they were in , or a worse position ?
Shawn DuBravac, Chief Economist of IPCWell , I think again , there's still a lot of uncertainties , but Mexico and Canada look like the big winners in yesterday's Liberation Day announcements the announcements coming out of the White House because they were essentially left off the list .
Philip StotenThey were off the list , yeah .
Shawn DuBravac, Chief Economist of IPCIt looks like if you qualify for USMCA , then you are still able to import products with zero additional tariffs .
Shawn DuBravac, Chief Economist of IPCNow , mexico and Canada both have the potential for tariffs in place for products that aren't USMCA certified and qualified , but I think a lot of companies are working to get any products that weren't certified to make sure that they are certified USMCA so they can qualify , and so , presuming that stays as is , I think Mexico and Canada are the big winners . And then , of course , for our industry , for manufacturing , for electronics , that really points to Mexico being a big winner in this , a big winner in this . The other kind of nuance here is that the tariffs are are only applied to non U S . You know the content of the product . So if you're shipping a product into the U S and 20% of it actually originates in the U S , then you can exclude 20% of the value of that product , and so I think that's also going to be a challenge when it comes to implementing these is knowing what content , how much content and what . What percentage of content is , uh , is attributable to us content and therefore can be excluded from the tariff .
Philip StotenSo there's still a lot of pieces that will have to be sorted out in the coming days and weeks yeah , I mean , it's a big list of tariffs and it's a big list of countries and all of those products have a big list of components in . So it's a hugely complex puzzle . But maybe that protects a little bit some of those motor vehicles , for example , that move backwards and forwards over the Canadian and the Mexican border during the manufacturing process . What did the markets think this week ?
Shawn DuBravac, Chief Economist of IPCYeah , I mean the markets reacted quite strongly on the announcement . Obviously , we've seen that aftermath and that will continue to roll through the rest of the global markets , and you have seen companies already start to make announcements . You saw some auto manufacturers
Domestic Price Increases and Mexico's Position
Shawn DuBravac, Chief Economist of IPCannounce that they were going to pause production in some of their facilities in Mexico and elsewhere as a result of the tariffs . So you are starting to see companies make decisions . You've seen some companies announce layoffs as a result of this , and so I think there's you know we're still in the very early chapters of this , but you are seeing companies start to react , and so the markets are absorbing all of that information as about as quickly as they can on the implications and the you know the impact that all of this will have on manufacturers .
Philip StotenYeah , and , like you said , it's's complicated so it'll take them some some time to figure it , figure that out . What about the um , the impact on the US economy ? We talked a bit about the uh , the r word , the recession word , um recently and feelings were that that that could be some of the temporary pain , um , and the word from the White House was it was short-term pain for long-term gain . How are you seeing that right now ?
Shawn DuBravac, Chief Economist of IPCDefinitely , the probability of a recession this year , in 2025 , continues to rise . What's unique , obviously , is that it's all being driven by policy decisions that can be reversed , and so I think there's still the opportunity to avoid a recession , but it would probably require the reversal of some policies . Of note certainly are these policies around tariffs , and so if we saw those policies reversed , then I do think you probably could avoid a recession in the US , because the US was on very good footing prior to the tariffs being put in place . There were clearly cracks starting to show and there were some concerns already starting to mount . But I think that a recession wasn't a foregone conclusion , and I think you know , after the announcements of this week , you will start to see the probability of a recession rise pretty significantly .
Shawn DuBravac, Chief Economist of IPCWhen you look at the consumer , they were already starting to cut back .
Shawn DuBravac, Chief Economist of IPCSentiment was waning for the consumers as well . They were already starting to cut back on purchases , and we could get kind of a weird result , you know , I think in the current month , where people might be rushing out to buy that car that they wanted to buy while it's still on the lot and before it's been impacted by tariffs . And then you know after that's happened and if they do see a big step up in prices , then I think you'll probably see them really take a step back . So I think you could have some noise in the data here in the kind of early weeks in that aftermath . But I do think that you will see consumers really take a step back , and they were already moving in that direction , partly driven by uncertainty , partly driven by just the ability to spend . You've seen the savings rate decline quite significantly , and the way we measure that is by looking at what people are not spending . So they're essentially spending everything that they had available to them for the most part , and so that can only go so far before that's been exhausted .
Philip StotenYeah , so it could be a bit of a peak and then a hiatus there . When you look at the different regions and the European Union kind of comes to mind , are there particular regions that you think there's a major change in the US relationship with ? And the reciprocal tariffs are going to be an issue and this is going to kind of roll and roll . I felt when I spoke to European EMS leadership at APEX and there was a good few there that there was a sense that the European Union was kind of perhaps waking up and investing in places that it should have done in the past . So there was some positivity about that . But there was a real sense that there was a kind of a renegotiation of the US-European relationship .
Shawn DuBravac, Chief Economist of IPCI think there is a renegotiating that's taking place and , as you noted , I think there is some noteworthy investment that's starting to materialize in Europe . You see it , I think , at the very front . You see it around defense , and you know , greater investment in defense and trying to build out also greater capacity to invest in defense in Europe . I don't think that's the only area . I think Europe , likewise , is also looking at what type of
Recession Probability and Consumer Response
Shawn DuBravac, Chief Economist of IPCtrade relationship should they be investing in ? What other countries might they be trying to develop relationships with ?
Shawn DuBravac, Chief Economist of IPCIf the relationship with the US is soured and they're going to see less business with the US , where could they offset some of that decline ? And so I think they're looking closely at what that might look like around the globe , and I think you'll see them rewiring their supply chains as well . So I think there will clearly be an initial hit to you know , you think about the automotive sector that might be exporting to the US , whether it's Sweden or Germany . I think you'll see those markets get hurt by some of the tariffs that have been put in place . You know some food products , maybe some other things that are imported at high rates . But I do think they'll look for other markets that they can serve , and they'll , you know . Try to figure out how to weather the storm .
Philip StotenYeah , and focus on those . And you're right about the changes in spending . Obviously , the recent package announced by the German government , I think just before APEX , was $ 900 billion and half of that was in defense but half of it was infrastructure . So there's , you know , there's . There's a lot of spend there in in other stuff as well . Just getting back to the figures that come out of IPC book to bills , over the last month there seems to have been a kind of a slight improvement there , so those are kind of ticking up slowly .
Shawn DuBravac, Chief Economist of IPCYeah , the book to bills look quite healthy both for PCB and EMS , especially for PCB . I mean you're looking at relatively historic levels for book to bill . I think it will take a few months to determine if that was orders being kind of pulled forward and trying to navigate this environment , but early signals of quite strong demand in both of those markets for the North American market . And again I think you see companies trying to figure out which direction they want to move in . Certainly we saw that in sentiment numbers which looked pretty strong . But we asked a special question this month about how they were responding to tariffs and you see a variety of different approaches that they're taking . About 31% of manufacturers said they were investing in automation and trying to counter the tariffs through that . A little under 30% were switching to non-tariffed suppliers . Now that kind of went out the window yesterday .
Shawn DuBravac, Chief Economist of IPCSo I don't know if that will continue to be a strategy . And then you see about 60% saying they were gonna renegotiate supplier contracts . So they're trying to move the costs of tariffs upstream if they can . And and then you know , on the workforce side you saw 18 percent announcing hiring freezes . Another 36 percent of companies were considering it . So it will have an impact on the labor market and I think every industry will take a similar approach . And I think that's where you know you start to see a potential slowdown in wage growth , you start to see a potential slowdown in jobs , and so that will also feed back into demand for the economy broadly .
Philip StotenYeah , there's definitely a ripple effect as it goes through the various different areas and the various different economies . There's a big impact there . One of the important things when you are an executive and there is all this stuff going on is to be doubling down on the industry , insights and the data you produce and the research you do , some new hires in that area . That's hugely valuable to the whole industry , to you when you're looking at supporting comment with insight and everybody
European Response and Industry Investment
Philip Stotenin terms of data . That's something you must be quite pleased about .
Shawn DuBravac, Chief Economist of IPCYeah , I'm super excited for all the things that IPC has done as far as so far building out the industry , intelligence , you know , staffing , and then also just everything that we're going to bring to market , and I'm really excited about some studies that we have coming up that we'll be releasing in a couple of months .
Shawn DuBravac, Chief Economist of IPCI think the other big shift that I really see from IPC is it's always been a very global association , but as we see , some of the bifurcation and the decoupling happen , the issues that you need to address in different parts of the world start to look very different , and so I see IPC taking also , I think , an important move in that direction being able to , you know , handle government affairs in Europe differently than they might in the US . We've added somebody for research in , you know , in Europe , and we also work very closely with Dieter Weiss , as you know and so being able to have unique statistics and a read on the market for different parts of the world , being able to address issues in these different parts of the world as they need to be addressed uniquely , I think is a very good move . So in many ways it is . You know , I see IPC just doubling down and continuing to move into a better position to handle the global issues that confront the industry .
Philip StotenYeah , and most of the , or many of the many of the large member companies are global , global organizations , whether they're global organizations that provide EMS services or they're global organizations that supply services and capital equipment to those companies . So I think it's essential . I think you're right . You've seen that process occur over an extended period of a few years , but just recently , and particularly in the last 12 months , it's felt very much like an international organization and , as you have geopolitical tensions of whatever type , the ability to support members uniquely in each location is important .
Philip StotenI was delighted to have had the opportunity to chat to Rich , who takes care of the political side in Washington , to talk to Alison , who takes care of Brussels , and to talk to Chris about the kind of overarching picture , and it was really nice to be able to see that stuff is really being delivered and met locally and dealt with locally , and those issues make it feel very much like a global organization . So I think supporting that with global insight is absolutely key and , as you say , we're in a fast moving world , so timely data becomes even more important . What are you expecting in the next few weeks between now and when we next speak ? I guess the hope is there's a lot of figuring out how these tariffs actually work , what's exempt and what isn't , and then it's just watching and seeing what the response is .
Shawn DuBravac, Chief Economist of IPCYeah , I think that there is obviously a lot of sorting out that will have to take place over the next four or five days in particular , but really over the next couple of weeks , and then also just getting more and more clarity the White House and from USTR and from others that we work closely with to understand how these tariffs should be implemented at the corporate levels . To help IPC members understand that , today we hosted an IPC member-only webinar that dived into the tariffs and the implications of the tariffs . So I expect more of that from IPC as well , that you'll see a lot more resources and insights coming and corporations are going to be trying to figure out , you know , a , how do we make sense of what's been announced ? And then , b , what changes do we start to implement ? Do we implement those changes immediately or do we take a more wait and see approach ?
Shawn DuBravac, Chief Economist of IPCI think there's still a lot of very mixed commentary coming out of the current administration , and so I think it can be difficult to determine what your next move is . There's still , I think , a little feel in Washington DC that this is just the start of a negotiation , and so the tariff rates as we see them today may not be the tariff rates that we end up with . But it's hard to make investments on that , it's hard to make decisions on that , and I think that's
IPC's Global Approach to Industry Intelligence
Shawn DuBravac, Chief Economist of IPCthe challenge that companies will face . So I think in the immediate term they're trying to figure out what do we do next , and then obviously there's a much longer term perspective that they'll have to take as well .
Philip StotenYeah , it's figuring it all out . It's a complex landscape . It felt very much when we were talking to people about it at Apex . It was all about tariffs , but I think , as you just pointed out , you got to remember that tariffs aren't all about tariffs . There's more to it . There's a lot to do with trade and there's a lot to do with other negotiations that are happening in the background . I was amused when I wrote to you and said this show should almost be weekly and you wrote back with just a one-word response , which was daily . I think it's important that at least when things happen and change rapidly , we can just jump on a call and provide this information to the readers and the viewers . So thanks so much for taking part again and look forward to talking again , either in a month , if not too much has happened , or much sooner , if something happens .
Shawn DuBravac, Chief Economist of IPCYeah well , with the rate of change that we're getting right now , I'm sure we will be talking very soon again on what's transpired in Washington and , as a result , what that means for the rest of the world .
Philip StotenThanks so much , Sean . Have a good day .