Americans want local goods, but not willing to pay more

Donald Trump. Photo: Reuters
Americans say they love US-made goods. They are less enthusiastic, however, about paying a premium for them.

At the AMES Companies Inc factory here, the wheelbarrows coming off the assembly line once every six seconds cost the company more to make in the US than abroad, but US retailers generally will not charge more for them because consumers would balk, AMES President Mark Traylor said. 

A Reuters/Ipsos poll released on Tuesday found 70 per cent of Americans think it is “very important” or “somewhat important” to buy US-made products.

Despite that sentiment, 37 per cent said they would refuse to pay more for US-made goods versus imports. Twenty six per cent said they would only pay up to 5 per cent more to buy American, and 21 per cent capped the premium at 10 per cent.

US President Donald Trump rode into office on promises of bringing back manufacturing jobs and boosting economic growth, and has criticised companies that move production overseas. Trump has also been quick to promote US-made goods, and on Monday released a state-by-state “Made in America Product Showcase” that included AMES wheelbarrows.

Lower-income Americans were the most enthusiastic about buying US goods, the poll showed, despite being the least able to afford paying extra for them.

Indeed, the biggest US retailer is well aware of the priority buyers place on price above all else. A spokesman for Wal-Mart Stores Inc said customers are telling them “that where products are made is most important second only to price.”

The good news is that Americans like the quality of many domestic goods.

Thirty-one per cent in the poll said American-made cars are the best in the world. German cars were voted best by 23 per cent of respondents. And thirty-eight per cent said US-made clothes were best.

Still, domestic manufacturers could be in trouble if they fail to capitalise on perceptions about the quality of their products while also keeping a tight lid on costs.

In order to compete, companies like AMES have to find ways to offset their disadvantage “We don’t have to be as cheap as imports,” says Traylor, who estimated he sells his wheelbarrows to US retailers for about 10 per cent more than importers.

Factors like cheaper domestic freight and a desire among retailers to carry lower inventories can help make up some of the cost differential.

AMES is also better positioned than overseas suppliers to help retailers be agile. When spring comes early, for example, AMES can respond quickly to ship goods to stores, Traylor said, something importers with longer lead times on orders struggle to do. Traylor said another secret to success for US manufacturers is investing in technology to cut costs.

AMES, a subsidiary of New York-based Griffon Corp, is pouring $50 million into upgrades at several locations. The Harrisburg factory, built in 1921, is dotted with aged machinery that has been fitted with robotic attachments to reduce reliance on human labour. AMES’ annual sales are $514 million. The company said it recently convinced a major retailer, who they did not want to identify, to switch from Mexican-made wheelbarrows to carry their product. AMES also said business is so strong that it is hiring 100 employees across its five Pennsylvania locations, including the Harrisburg factory.

Traylor says AMES wants to bring more work back from overseas. But that can be difficult. And the production of certain components may prove impossible to ever bring back to US soil.

In late April, Trump marked his 100th day in office with a visit to the AMES plant. With workers chanting “USA, USA,” Trump asked if every part of the wheelbarrows was made in America.

Everything, he was told, except the Chinese-made tyres. US manufacturers stopped large-scale production of air-filled tyres for garden equipment years ago, and the cost of setting up production now would be hard to justify for the low-margin product. Some rubber makers still manufacture solid rubber tyres in the United States, but the last time AMES bought any they cost nearly twice the roughly $7 they pay for a Chinese tyre, a big added cost for a wheelbarrow that often retails for less than $100. “Is it feasible to get US-made tyres?” asked Mark D’Agostino, the company’s vice-president for supply chain. “We don’t know yet.”

 
To be sure, some manufacturers can command a big premium for American-made products. Klein Tools Inc, a privately held company based outside Chicago with annual sales of $500 million, makes hand tools that are highly sought after by electricians and other workers. A pair of 9-inch Klein pliers sells for about 30 per cent more than a comparable import.

The Reuters/Ipsos poll was conducted online in English throughout the United States from May 24 to May 31. It gathered responses from 2,857 people, including 593 adults who made less than $25,000 per year, 1,283 who said they earned between $25,000 and $74,999, and 805 people who earned more than $75,000.

The poll has a credibility interval, a measure of accuracy, of 2 percentage points for the entire group, 5 points for the low-income respondents, 3 points for the middle-income respondents and 4 points for the high-income respondents.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel