February 2025

Warm regards,

Thiago Guimarães
Director of Industry Intelligence, IPC

Trade Wars Looming 

On February 3, 2025, President Donald Trump announced a 30-day suspension of the planned 25% tariffs on imports from Mexico and Canada, which were initially set to take effect on February 4. This decision followed negotiations with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau, who both committed to enhancing border security measures. 

Despite the temporary reprieve for Mexico and Canada, the 10% tariffs on Chinese imports proceeded as scheduled on February 4. China immediately enacted several countermeasures in response. Starting February 10, China will implement additional tariffs of 15% on U.S. coal and liquefied natural gas, and 10% on crude oil, agricultural machinery, and large-engine vehicles. Additionally, China has initiated an antitrust investigation into Google for potential violations of Chinese antitrust laws. Furthermore, export controls have been placed on critical minerals, including tungsten, tellurium, bismuth, molybdenum, and indium. These minerals are key inputs for defense, clean energy, and other industries.  

The situation is changing rapidly and may have evolved by the time you read this. The United States-Mexico-Canada Agreement (USMCA) is set for review in 2026, and the threat of 25% tariffs on imports from Mexico and Canada could be a tactic to advance these negotiations or secure better terms. Despite a 30-day pause, this appears to be the start of a longer trade war with potential for ongoing tit-for-tat retaliations. President Trump has also suggested that the European Union could be the next target for tariffs, so we are still very much in the early chapters.  

The U.S. enters a trade war from a position of strength, with recent economic data pointing to resilient consumer spending and solid economic growth, but the ability for the economy to remain resilient will be dependent on what happens with tariffs. The U.S. economy expanded at a 2.3% annualized rate in Q4 2024, contributing to 2.8% full-year growth—a slight dip from 2.9% in 2023 but still reflecting remarkable economic resilience. 

In December, personal income rose 0.4%, aligning with expectations, while personal consumption surged 0.7%. Over the past year, personal income grew 5.3%, while spending climbed 5.7%, reinforcing the idea that consumers are still driving economic activity despite higher interest rates. However, spending did outpace income growth, causing the personal savings rate to decline to 3.8%—the lowest in two years. 

Despite solid economic performance, inflation remains a concern. Core PCE, which excludes food and energy costs and is the Federal Reserve’s preferred inflation measure, rose 2.8% year-over-year through December—well above the Fed’s 2% target. Notably, this marks the third consecutive month where core PCE hasn’t budged, suggesting inflationary pressures remain persistent.  

The Fed’s decision to hold interest rates steady last week reflects its cautious stance, with Chair Jerome Powell emphasizing that the economy is in a good place and the central bank has no urgency to cut rates. However, the rising risks from tariffs and supply chain disruptions could force the Fed to adjust its strategy later in 2025. 

In response to slowing economic activity on the other side of the pond, the European Central Bank cut interest rates to 2.75%, marking the fifth-rate reduction in seven months. ECB President Christine Lagarde signaled that further cuts may be on the horizon as the eurozone struggles to regain momentum amid weak consumer spending, sluggish business investment, and ongoing global uncertainty. 

With strong consumer demand, a healthy labor market, and stable GDP growth, the U.S. economy has room to absorb shocks—for now. However, sticky inflation and uncertain trade outcomes suggest that 2025 could be a turning point and something we will be watching closely. 

EMS: 
“North American EMS Industry Down 7.8 Percent in December” 
IPC's December 2024 EMS Statistical Program reveals a strong book-to-bill ratio of 1.26, driven by a 28% year-over-year surge in bookings despite an 8% drop in shipments, signaling potential growth amid tariff uncertainties. 

PCB: 
“North American PCB Industry Sales Up 59.6 Percent in December” 
IPC's December 2024 PCB Statistical Program reports a book-to-bill ratio of 1.19, fueled by a 59.6% year-over-year surge in bookings despite a slight 0.3% dip in shipments, with tariff uncertainties driving order acceleration. 

Global Sentiment Report:
“Electronics Industry Demand Reaches Neutral Ground” 
IPC's January 2025 Sentiment of the Global Electronics Manufacturing Supply Chain report reveals industry demand reaching neutral ground at 100, with 52% of manufacturers facing rising labor costs, persistent material cost pressures, and minimal shifts in work-from-home policies for factory roles. 

Community January 2025: 
 
“Trade Tensions and Tariffs” By Shawn DuBravac  
In his article "Trade Tensions and Tariffs" from IPC's Winter 2025 Community Magazine, Shawn DuBravac, Ph.D., IPC's Chief Economist, examines the potential economic impacts of proposed universal tariffs on imports, highlighting concerns over increased costs and disruptions in global trade patterns. 

“Roadmapping Sustainability” By Tom Okrasinski, Nokia Bell Labs, Fu Zhao, Purdue University, and Francis Mullany, iNEMI.  

“Tariffs and Trade: EMS & The Economist on Global Manufacturing's Future Amid Political Shifts” 
In their latest podcast, Shawn DuBravac and Philip Stoten discuss how tariffs under the Trump administration are rapidly altering trade dynamics and their significant economic implications. 

IPC industry intelligence aims to provide valuable insights into the entire global electronics ecosystem. Through in-depth reports and expert analysis, industry thought leaders provide trend evaluations designed to benefit the electronics manufacturing industry. Learn more and explore IPC’s industry intelligence today.

Contact the team: Shawn DuBravac, Chief Economist; Thiago Guimarães, Industry Intelligence Director; and Kate Koger, Public Affairs Coordinator.