William Demant Holdings, one of the world’s largest hearing aid manufacturers, could be negatively impacted if Donald Trump’s new administration makes good on his claims that the United States needs a “border tax” on goods entering the US from Mexico. According to analyst Michael Friis Jørgensen, in comments to the Danish publication, EuroInvestor, the company could be negatively impacted in the future following its decision last year to close one of its production facilities in Minnesota and shift more production to its new facility in Mexico.
William Demant’s production move to Mexico is part of the company’s ongoing efforts to improve efficiency and cut costs, which coincides with similar moves in Europe, where the company has begun expanding its operations in Poland.
US Policy Change Looming?
Any new trade restrictions or customs barriers on products coming from Mexico could make it harder to conduct business for William Demant and a number of other companies. However, according to many analysts across the business world, the Trump administration is still a big question mark.
Many, including Mr. Trump, argue that the substantial decline in US manufacturing over the past two decades was due in large part to the North American Free Trade Agreement (NAFTA), signed by the US, Canada and Mexico in 1994. While some debate the figures on job losses (or gains) due to NAFTA and other major trade agreements, the populist anger against such agreements found support across the political spectrum during the 2016 US presidential primaries, giving rise to the popularity of both Donald Trump and Bernie Sanders.
Due to the growing dissatisfaction with Free Trade among the American public, there is a possibility that the new administration just might make good on its promise to levy tariffs on countries like China, Mexico and others.
According to Jørgensen, “William Demant is probably going to have to take into consideration that a duty may be placed on items imported from Mexico to the US. The risk exists.”
Overall, Jørgensen says he doesn’t believe the any potential tariffs on Mexican imports will be a major problem for the hearing aid industry as a whole, but they do pose potential risk moving forward. If talk ultimately turns to real policy, hearing aid production could return to the US to avoid penalties.
*featured image courtesy Time