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Mold making Rapid prototyping
Turning your ideas into 3D CAD files, 3D prints, prototypes and 1000s of manufactured parts for more than 19 years!
Are you concerned about how the proposed new US tariffs on Canada, and China will effect the cost of your 3D CAD design, prototyping or manufacturing project? Don’t be!
There’s a lot of confusion around this topic currently, but despite any future tariffs, it will still save you a lot of money to manufacture your project in Canada and China rather than in the USA. In this article we’ll explain why in detail.
J – CAD Inc. assists our clients with these services: 3D CAD design & engineering, 3D printing & prototyping, injection molds & mass production. Below is how taxes and tariffs effect the services offered by J – CAD Inc.
In this chart you can see the state and local taxes applied in various US states:
Over the 19 years we’ve been in business, we’ve always been told we’re able to offer better prices as a Canadian company than working with businesses based in the USA. This is not going to change, even if tariffs are introduced!
Almost overnight, however, the most common questions we’re getting is about tariffs, taxes and J-CAD Inc.’s operating structure. With all the news in media outlets about tariffs, many clients think it’s going to be cheaper now to manufacture their products in the USA, but that’s actually not the case.
In this article we’ll show you why you will save a lot of money manufacturing with J-CAD Inc. (a Canadian corporation), despite the potential introduction of any future tariffs, along with clearing up some common questions and misconceptions around tariffs.
Here’s an example of hiring J-CAD Inc. vs. hiring an engineering firm in the USA for an end-to-end manufacturing project including CAD design, prototyping, mold creation and a mass production run, and total costs you could expect for each stage of the project. All prices are in USD.
By working with us, on exactly the same project with exactly the same quality and deliverables, you would save around $8,000USD even if tariffs were introduced.
This is just one example, but based on 19 years of extensive experience manufacturing 1000s of parts for 1000s of American clients both onshore and internationally, we can say categorically that it will still cost way more to make your product in the USA than overseas.
Yes, currently America is applying a 10% tariff to Chinese imports. This could go up or down depending on how the trade war plays out. There is also the near possibility of a 25% tariff on Canadian imports, but again, who knows how that trade war will end.
Tariffs are extra duties the US tacks onto items entering the country. Each product or part order entering the US from China and potentially Canada will be subject to this tariff. This does not mean, however, that it automatically becomes more affordable to manufacture inside the USA. Quite the contrary.
While political rhetoric can make it sound like countries that tariffs are imposed upon are liable to pay for those tariffs, the truth is that the person or company importing the goods is the one paying, not the overseas supplier or country. This aims to make it cheaper to produce products onshore than overseas, however, in practice it makes products more expensive and drives inflation overall, rather than lowering it in the country imposing the tariff (USA).
For example, iPhones can be manufactured affordably overseas. Millions of smart phones enter the US border every year. You’re probably reading this on one of them right now. Due to the costs of materials and labor in the US, if iPhones were “Made in USA”, they would be prohibitively expensive, costing 30-60% more, and only very rich people would be able to own them.
When you bring goods across the border, you’re the one footing the tariff bill. That means that if you are manufacturing offshore, depending on the circumstance you need to budget for tariffs within your project cost. There has been a lot of confusion about this, but unfortunately you will find this to be true.
Here is a recent example of CEO Chris Miksovsky being interviewed on MSNBC. For the last 18 years Chris has had his camping goods successfully manufactured in China. Chris contacted multiple manufacturing companies in the USA about making his product, and was not able to get a quote from a single company to manufacture his simple product in the USA.
Chris believes that while US-based manufacturers have the capability and technical expertise to produce goods in America, that mass manufacturing and the creation of labor intensive products is not a focus for the US.
Because there was no interest in making his product in the USA, that left him having to figure out how to make his business work despite tariffs. Chris explains the belief that foreign countries pay for tariffs is a fallacy and that as a US citizen with a US company he will be responsible for tariffs. Because he will have to pay tariffs for importing his products he will have to raise his prices to cover the extra cost, meaning consumers will inevitably have to pay more for his products.
There are, however, ways to avoid tariffs and offset their costs, which we’ll discuss next.
Each state and locality in the US has different taxation rates, however it averages around 10% for combined state and local sales tax.
When you deal with a US-based design shop or manufacturer, they are forced to add sales tax onto every aspect of your project.
Meanwhile, a company from Canada charges zero state or local taxes, and can manage your project in a way that avoids tariffs as much as possible (eg. by storing molds offshore, rather than importing them). This state/local sales tax saving effectively balances and cancels out any tariffs applied and can save you $1000s on your final project cost.
Tariffs are only charged on physical products that cross the US border.
Because CAD design is a digital service, no tariff is charged.
If molds are made in China for instance, then imported to the US, a tariff is charged. However, if you are manufacturing in China, it’s best to produce and store the molds in China as that’s where your manufacturing will occur. We safely store our customer’s molds in China for free as part of our service. Because your molds are never imported, you never pay a tariff on them, while making molds in the USA, you’d have to pay the state tax to make them + 30-60% more because of higher labor and higher material costs.
We’ve worked with many clients in the past who wanted to be able to say their product was “Made in USA”, where we manufactured them at a local facility. Because of this experience, we can say for sure that manufacturing in the US is much more expensive than offshore, for the same quality product. For example, manufacturing stateside can easily run 30% to 60% more expensive because of higher material costs and labor prices.
A client in Florida once told us he loved the idea of a “Made in USA” label on his product, until he compared our onshore and international manufacturing quotes and realized how much money he could save by manufacturing offshore. This is the case every single time, even with high tariffs imposed and for this reason, we have never been successful in setting up a manufacturing facility anywhere in the USA because it just doesn’t make economical sense.
If you’re considering manufacturing locally to avoid tariffs, you might be missing out on much higher cost savings elsewhere.
We have consistently found that it’s actually very difficult to get products manufactured in the USA both through firsthand experience and anecdotally through our clients.
For example, we have contacted many local manufacturing facilities over the years to try and organize partnerships that would allow us to manufacture products in America for clients who want their products “Made in USA”. We have found that these companies never respond. Bizarrely, we find this even when local manufacturing companies reach out to us first asking if we can send them work.
Many of our clients have also shared with us similarly frustrating experiences they had with local manufacturing facilities prior to working with us. The client may start by wanting to manufacture their product in the USA. Some clients have then called dozens of US-based manufacturing facilities who initially sounded happy to work with them, but then never answer their queries or price the project for them. In the interview we embedded above with Chris Miksovsky, he shares exactly the same experience that we and our clients have had with “Made in USA” manufacturing facilities.
In contrast, our Chinese manufacturing partners are very diligent, responsive and reliable. As a result most of our clients who initially wanted their product “Made in the USA” end up being more than happy to have their product manufactured overseas.
Yes! For a long time the exchange rate between USD and CAD has been hovering around 1:0.7. Because the Canadian dollar is weaker than the US dollar by approximately 30%, labor costs are cheaper here, so even though we charge in USD, because we’re a Canadian corporation we can charge a lot less than a US engineering company when producing your product or part, while at the same time NOT CHARGING ANY STATE TAX!
Hopefully that’s cleared up the issue of tariffs, and how despite them you can still get the best value for money on your manufacturing project, even if that means still completing some or all of your project offshore.
To get a quote on your project and find out how much you can save overall, get in touch with us through our quote page or contact page. We look forward to working with you!
Jason Vander Griendt is a Mechanical Engineering Technician with years of experience working at major companies such as SNC Lavalin Inc, Hatch Ltd. Siemens and Gerdau Ameristeel. He is the CEO of JCAD – Inc., a company he started in 2006 after seeing a gap in the market for businesses who could assist clients through the entire product design and manufacturing process.
Jason has been featured in Forbes, has had his businesses analyzed and discussed in multiple start-up books, was a previous winner of the Notable8 Digital Innovator of the year award, and is a regular guest on business panels and podcasts. Email Jason at , or follow him on LinkedIn.
