LevaData Survey: Manufacturing Executives Predict Global Recession in 2020
Survey Also Reveals That Biden Is Only Democratic Candidate Whose Trade Policy Execs Trust as Much as Trump’s
SAN JOSE, Calif. — January 23, 2020 — Tariffs are a primary concern among enterprise manufacturing executives heading into 2020, according to a new survey released today from LevaData, the company that delivers applied AI to transform strategic sourcing and procurement. The survey of more than 100 manufacturing and production executives — in the high tech, consumer goods, industrial, automotive, and life sciences industries — sought to illustrate their expectations of global trade issues in 2020.
“Concerns regarding tariffs are clearly top of mind for enterprise manufacturing executives,” explained Rajesh Kalidindi, founder and CEO of LevaData. “The good news is that emerging technologies can help predict the likelihood of new tariffs and other risks, allowing supply chains to build contingency plans.”
Manufacturing Execs Predict a Global Recession in 2020
A majority of manufacturing executives believe that a global recession is likely in 2020 (61%) and that an extended trade war would likely lead to a global recession (70%).
When asked what issues are likely to have the greatest impact on their company in 2020, trade restrictions (42%) were the biggest concern by far, followed by geopolitical instability (15%), natural disasters (12%), and impeachment-related uncertainty (11%). Despite the increased likelihood that Brexit will occur this year, only 7% expressed concern about this issue.
Further, executives fear that increased tariffs will mean:
- Paying more for goods and services (48%)
- Paying more for parts and labor (47%)
- Worsening relations between the U.S. and China (43%)
- Seeing workers out of jobs (44%)
- Paying workers more (31%)
Consumers Will Pay for Increased Production Costs
The vast majority (89%) of the executives surveyed agree that tariffs will increase production costs. Most estimate this increase at 10-20% over the course of the year. More than two-thirds expect both their production costs (71%) and material costs (67%) to increase.
As a result, 79% say they are likely to increase the price of their goods and services.
Indeed, when asked what tactics their company will likely pursue in the event of increased production costs, passing the cost along to consumers ranked number one. This was followed by trying to find cost savings elsewhere in the company, reducing profit margins and renegotiating part supply deals.
By industry, respondents expect electronics (60%), automotive (42%) and agricultural products (39%) in particular to bear the brunt of the trade war’s impact.
Will a Trade War Pay Off in the Long Run?
While execs recognize the near-term downsides of the trade war, they’re actually optimistic about its long-term outcome. Broadly speaking, only 22% of manufacturing executives don’t support the newly imposed tariffs. Nearly a third (32%) actively support them, and 46% are neutral. Further:
- 65% think the tariffs will ultimately lead to improved global trade practices
- 40% believe they will lead to improved U.S.-China trade relations in 2-3 years
- 37% believe their supply chain operations will run more smoothly in the long term
Nearly half (47%) believe the tariffs will ultimately lead to economic growth in the U.S. However, an almost equal number (46%) believe they will lead to economic decline.
Trust in Trump Is Balanced
More than a third (37%) of manufacturing executives believe that the meetings between President Trump and China’s President Xi will result in reduced tariffs. An additional 21% think China will agree to most U.S. demands in order to eliminate tariffs, and 15% predict a temporary suspension of most tariffs.
More than half (58%) of executives think it is unlikely that Trump will be impeached and removed from office. In the case that he is removed from office, two-thirds (66%) would trust Vice President Pence to carry on trade deals with other countries
As for Democrats, respondents believe that Joe Biden has the best trade policy, followed by Bernie Sanders. Biden is also the only Democratic candidate whose trade policy manufacturing executives would trust equally with Trump’s:
|Who do you think would do a better job of managing U.S. trade policy?|
LevaData helps global enterprises improve gross margins by reducing supply chain costs, with a focus on delivering measurable and accountable supply chain solutions and strategies that transform companies. The unique LevaData Cognitive Sourcing™ Platform allows customers to sense, recommend, act and learn. Customers include leaders in the top global supply chain organizations, as well as medium-sized OEMs seeking to achieve best-in-class direct materials sourcing practices. LevaData is headquartered in San Jose, California. For more information, visit www.levadata.com