Trump’s Tariffs – this isn’t fun.
By this point the reality has set in that US tariffs are being levied across a whole range of items (this link will download a spreadsheet showing all the applicable HTS codes) of goods made in China.
Currently rates are 25% for the items in part 1, and 2 and 10% for part 3 of the 301 schedule. However, tariff rates are set to increase to 25% for the section 3 items listed on 1/1/2019, which is going to greatly affect the paper crafting, scrapbooking and stationery markets.
Retailers and manufacturers are both wrapping heads around the best way to manage the increase. When the dust settles the most likely scenarios will be a price increase to consumers (passed on by retailer) and a reduction in margin from manufacturers. In the short term this appears that this will be the way that this is handled.
There are options of moving products produced in China to other markets like Taiwan, Vietnam, Korea, etc. This may be an option for some products and it is worthwhile investigating, we do have sources in Taiwan and Vietnam that we can look at moving production to markets to alleviate the tariff burden. Typically the products are being produced in China are produced there for a reason because the cost and quality are the best available. Even a 25% increase when implemented may not justify moving production and paying a higher production cost without any certainty that an additional tariff would be applied to the country that production is moved to. There is no good solution to the current situation and each product line will need to be evaluated individually to determine the best way forward.
As with all challenges there is always opportunity and the most nimble and best sourced companies may see an advantage in leveraging product lines produced in markets without the additional tariffs.