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Another Surprising Industry Falls Victim To Ongoing Trade War Chaos

`RV

Trade war crosscurrents have damaged the American manufacturing sector, and within, a lot of stress is building up in the RV industry, according to discussions with industry insiders and economists, along with data showing a sharp sales decline amid increasing costs, reported Reuters.

The industry has taken a massive blow from President Trump's tariffs on steel and aluminum and other retaliatory duties on thousands of Chinese-made RV parts, from electronics to LED lights to vinyl.

Domestic shipments of RVs to dealers have plummeted 22% in the first five months of this year, compared to the same period last year, after dropping 4% in 2018, according to the Recreational Vehicle Industry Association.

The RV industry's crisis shows how President Trump's trade war has backfired, hurting the industry he promised to protect.

Tariff-related price hikes have forced RV manufacturers to pass on costs to dealerships, which in turn the American consumer bears the brunt of the tariff, has slowed sales at dealers who are cutting orders and laying off workers.

Michael Hicks, a Ball State University economist who tracks the industry, warned that the collapse in RV shipments could indicate a wider economic downturn. Hicks said shipments had fallen sharply just before the last three U.S. recessions.

"The RV industry is a great bellwether of the economy," said Hicks, because the vehicles are an expensive and discretionary purchase, easily delayed by consumers who start to worry about their financial stability.

Reuters suggests that the RV industry is headed for a significant consolidation after several years of expansion, led to new factories, has oversupplied the market.

(Click to enlarge)

Managers at RV manufacturers and suppliers said President Trump's trade war is why the industry is now crashing.

"The tariff price increases are what tipped the RV business — it started the landslide, no question," said Tom Bond, the materials and purchasing manager at Adnik Manufacturing, an Elkhart-based division of Norco Industries. Related: Bezos’ Next Big Project Could Be Worth $100 Billion Per Year

Thor Industries controls almost 50% of the North America RV market, reported its sales have dropped 23% in its fiscal third quarter, which ended in April, compared to a year ago. Production cuts and layoffs have been in full swing at some of Thor's North American plants.

Thor assembler Demiris Jahmal Williams told Reuters his hours were cut, and his factory has been shut down through July.

"This is the worse I've seen it," he said.

Michael Happe, CEO of Winnebago Industries Inc, said tariffs had forced RV manufacturers to increase costs to dealers.

While many American believe the RV industry is entirely American - that's not the case when Reuters examined supply chains of RV manufacturers that extended into China. The industry relies heavily on imports for everything from air compressors, electronics, bedding fabrics, lighting, and flooring.

And according to Hick's comments, the next recession may have already arrived with crashing RV shipments spurred by a trade war.

Any rate cut today is three quarters too late, the downturn has already begun.

By Zerohedge

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