Variable Message Signage
Sourcing Guide & Market Intelligence

Elevated Tariffs are increasing prices for law enforcement, security and safety equipment

• On April 9, the Trump Administration announced a 90-day pause on the previously implemented country-specific tariffs and implemented a blanket 10.0% tariff rate on all imports in the interim. Additionally, on May 12 the administration lowered tariffs on most Chinese imports from 145.0% to 30.0% for 90 days.
• As a result, all foreign suppliers in law enforcement, security, and safety equipment face significantly increased costs when selling products to US buyers, and domestic manufacturers of these goods face higher costs when sourcing key inputs for these products.
• Countries such as China, Germany, Mexico, Thailand, and Vietnam are leading sources of imports in this industry, providing high quantities of goods such as safes, locks, security cameras, security systems, and personal protective equipment.
• Elevated tariffs are likely to impact pricing and supply chains in this industry due to US reliance on imported manufactured goods, which gives foreign suppliers the leverage to pass through the costs of tariffs to buyers and domestic suppliers the leverage to raise prices.
• Consequently, the Yale Budget Lab projects a 5.8% average increase in metal product prices, impacting products such as security gates and safes, stemming from these tariffs. Electronic security devices, such as cameras or metal detectors. In the personal protective equipment market, prices are forecast to rise by between 6.4% and 16.9%.

China bans exports of rare minerals to the United States

• On December 4, China announced a ban on all exports of gallium, germanium, graphite, and antimony to the United States, escalating existing trade restrictions on these materials.
• China is the leading global producer of each of these metals, producing 98.3%, 67.9%, 62.0%, and 48.2%, respectively, of the world’s gallium, germanium, graphite, and antimony supplies, respectively.
• The United States can still access these resources from other trade partners who make up most of the remaining global supply of the impacted commodities, such as Canada, Japan, and Brazil.
• However, the loss of supply from China, the leading producer of these materials, will increase prices and supply chain risk in a range of markets that rely on the affected metals, such as the semiconductor, batteries, and solar cell markets.
• China’s export ban on these materials is in retaliation to expanded US export bans on advanced semiconductor manufacturing equipment and technologies to China announced two days prior. This ongoing trade dispute adds further uncertainty to technology markets, which are often reliant on components and materials exported from China.

Russian invasion of Ukraine is putting additional strain on US chip supply

• Until recently, the United States sourced nearly all of its neon gas (an essential material in the laser imprinting process to produce semiconductors) from Ukrainian and Russian producers. Previous conflicts between the two nations, specifically related to the Crimea conflict in 2014, resulted in a nearly 600.0% increase in the price of neon.
• The Russian Ministry of Industry and Trade announced in early June that it would be limiting neon gas exports as part of its sanctions against countries it views as unfriendly. This move will add to lead times and prices for neon.
• Downstream semiconductor manufacturers keep stockpiles of neon gas that have allowed them to continue manufacturing chips, though it is unknown how long these stockpiles will last. Semiconductor manufacturers will likely pay higher prices for neon gas outside Ukraine as global supplies dwindle.
• Pat Gelsinger, the CEO of Intel, estimates the chip shortage will persist until early 2024 due to shortages of manufacturing equipment, which will continue to limit production even as the supply of semiconductor components rises.