By Josh Cosford, Contributing Editor
It’s hard out here for a crimp. Indeed, the fluid power industry in North America can be described as the USA walking a tightrope spanning Niagara Falls while holding a balance pole opposed by Mexico and Canada at either end. It’s a heavy pole to balance, and getting it right is critical not only for either tip of the pole but also for the tightrope walker.
USA Canada Mexico tariff wars
It’s hard to avoid social media posts where world leaders posture over what is essentially a zero-sum game at best but, more realistically, a negative-sum venture. Every time a spontaneous tweet calling down twenty-five percent fire and brimstone goes viral, we fluid power professionals react by securing Teams meetings with customers or suppliers to discuss the minutia of HS Codes, certificates of origin and whether to bury tariffs or add a costing line to invoices.
We’ve had two across-the-board tariff scares in ’25, and we’re not yet three months through the year at the time of this writing, with the promise of a “for real this time” showdown next week. It’s hard to get your ducks in a row when the ducks are three Red Bulls deep, and the row looks like an SCCA autocross course.
The current bilateral tariffs on steel and aluminum are the current threat damaging fluid power outfits since metal distributors traditionally pull from their favorite mills on either side of border without concern of the 25% tariff. Hydraulic manifolds, steel and aluminum cylinders and valve bodies of all alloys are subjected to huge cost increases for their raw material.
So manufacturers are expected to eat massive cost increases, leading to 10-20% less into the bottom line for finished products. Do we absorb this? Do we increase prices? Do we add a tariff surcharge? And now, realistically, we’re going to hit our cross-border customers with a price increase alongside the threat of their own tariffs, which is essentially going to euthanize our international revenue altogether.
Of course, the math isn’t so simple and could be different for every product you sell. Your accounting and purchasing team is going to work overtime to run tariff classification analyses on finished components with internationally diverse bills of materials. Do we Canadian manufacturers source American steel and incur the 25% Canadian tariff on raw materials with hopes of favoring regional value content to avoid export tariffs? Or do we keep our costs down by using Canadian raw materials and subsequently working with cross-border customers to help them mitigate their own costs?
It’s a sticky situation with no winners. The idea of re-shoring business is great on the surface but difficult in practice. It’s not like steel mills, auto plants, and cylinder manufacturers pop up overnight, and even if capital flows into local manufacturing investment, by the time these projects are complete, there is no guarantee that the subsequent administrations will continue to fly the protectionist flag.
As a Canadian businessman, I love my American and Mexican family, friends and customers, of which I have many. I’ve discussed the tariffs with customers and suppliers, and besides the confusion of (happily) delayed timelines, we all agree that applying North American tariffs is akin to childhood friends asking each other to cough up paper route money every time they throw and catch a baseball.
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