The 2020 Mid-Year Economic Update_long

Tariffs and COVID-19: Case Studies on Distribution Disruption

Industrial distributors Earnest Machine and LINC Systems share the impact of trade wars and the coronavirus on their businesses.
China United States trade and American tariffs as two opposing cargo ships as an economic taxation dispute over import and exports concept as a 3D illustration.

A recent MDM Spotlight highlighted the experiences of two importers of industrial fasteners with regard to business challenges brought on by trade war tariffs and the emergence of the COVID-19 pandemic. Kirk Zehnder, president and CEO of master distributor Earnest Machine, and Joe DeMarco, VP of communication and business development at industrial fastener distributor LINC Systems, spoke with MDM CEO Tom Gale on the state of their businesses in today’s environment.

Earnest Machine has intentionally stayed away from the Chinese market for a while now, avoiding some of the pain around tariffs and even picking up business from customers who were put off by competitors’ emails announcing 15% price increases. For LINC Systems, the impact has come from back-and-forth pricing changes on staples in particular, as most staple production takes place in China, DeMarco noted.

Also see: “MDM Spotlight Videos.”

Following on the heels of tariff-driven uncertainty still unresolved came the COVID-19 coronavirus in March. LINC Systems acted proactively to avoid developing supply chain issues as the virus first hit Asia and Europe, while Earnest Machine took a hit on lead times temporarily, they’ve been returning back to normal, even with trucking companies operating from home offices, said Zehnder.

U.S. Impact

As an optimistic person, Zehnder added that he would like to believe the U.S. can follow in the footsteps of China, Korea and other countries that were able to rebound from negative effects, but expects a different cultural orientation in the U.S. will have an impact on our recovery.

“I do think that in Korea and China, particularly when the government says, ‘Line up and everybody go get tested’ or, ‘Do the following,’ people fall in line,” he said. “… Culturally, we’re just a different country. We don’t want to do those things. ‘I want my freedom. I want to go do what I want to do.’ So, I think that the attempt or the ability to flatten the curve in a country with a different cultural orientation is a little more possible there. I really want to see that here. Fingers crossed things go that way.”

“Business is flowing” for LINC Systems at the moment, and DeMarco said it’s difficult to predict too far into the future — especially the impact of the virus on their customer base going forward. “That’s a little bit scary,” he said.

Listen to the full MDM Spotlight with DeMarco and Zehnder by clicking here: https://reports.mdm.com/mdm-spotlight-idea-tariff-covid19-fastener-imports/

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