ABB Invests $120M to Boost US Production Amid Tariff Uncertainty
ABB, a Swiss engineering conglomerate, is expanding its domestic production in the United States and other countries to mitigate the impact of tariffs imposed by former U.S. President Donald Trump. The company's CEO, Morten Wierod, announced that ABB has committed to investing $120 million this year to increase the production of low-voltage electrical equipment in its factories in Tennessee and Mississippi. This investment is part of a broader strategy to enhance ABB's domestic production capabilities globally.
ABB aims to raise the proportion of locally produced goods to over 90% in India, and similar targets are set for China, Europe, and the United States. The company plans to achieve these goals primarily through organic investments, although it is not ruling out non-organic investments. This strategy is designed to reduce the impact of tariffs while also positioning the company to capitalize on market growth.
Currently, 75% to 80% of ABB's sales in the United States are from domestically produced goods, while in India and China, this figure is around 85%. In Europe, the proportion is approximately 95%. Over the past three years, ABB has invested around $500 million in the United States and plans to maintain this investment pace. The company emphasizes that this is a continuous project aimed at reducing dependence on imported products from outside the United States.
The tariff policies implemented by Trump have created uncertainty in global markets, straining trade relationships and prompting companies to reassess their operational strategies. Despite this, ABB expects the impact of tariffs on its business to be limited for the remainder of the year. The company has not set a specific timeline for achieving its domestic production targets, as it aims to continue benefiting from economies of scale without pursuing 100% production in any single country.
The COVID-19 pandemic has underscored the importance of having flexible domestic production capabilities to ensure uninterrupted supply. Wierod highlighted that having multiple production sites allows ABB to continue supplying customers even in the event of trade disruptions. This flexibility is crucial for maintaining customer confidence and ensuring business continuity.
