Tariffs On $200 Billion In Chinese Imports, China’s Response Go Into Effect

On Monday, the latest round of tariffs on Chinese products went into effect, involving approximately $200 billion in imports. The tariffs are set at 10 percent through the end of the year and will rise to 25 percent on January 1, 2019. The tariffs on Chinese imports are in conjunction with the U.S. Trade Representative’s (USTR) Section 301 investigation into Chinese trade practices. The USTR has found that China has engaged in unfair policies and practices relating to U.S. technology and intellectual property.

China has responded to these tariffs with levies of five to 10 percent on $60 billion in U.S. products, including clothing, meat and auto parts, that also went into effect on September 24. The Trump Administration has already signaled its response to any Chinese retaliation, noting that it would pursue another round of tariffs, affecting approximately $267 billion in additional imports.

With the tariffs just going into effect, many industry companies are still formulating their response to what is an evolving situation. In conversations with PPB Newslink, some suppliers have said they would hold off on raising prices through the end of the year, while other are taking a wait-and-see approach. Distributors have also started having conversations with clients on orders involving the affected products. The situation appears fluid at the moment, with suppliers and distributors working to communicate to clients the responses they are getting about price increases from importers and vendors to their clients.

Trevor Gnesin, CEO of supplier Logomark, says, “We are accessing the situation on which products are affected. We have some huge shipments due to dock and we are trying to see when prices will have to be increased to compensate for the additional tariffs. We will try to hold pricing where we can, but unfortunately there will be immediate increases on product that is sold out. Our branded suppliers have already notified us that there will be an immediate increase on their products starting October 15. I suggest distributors get their orders in early.”

“It’s a bad thing for us,” says Craig Nadel, CAS, CEO of distributor Jack Nadel International. “Tariffs are taxes and no industry has ever come out asking to be taxed more. A high percentage of what we sell comes from China and it will now be more expensive. Our industry competes with other forms of advertising and some of those won't have tariffs to deal with, like Facebook ads, television, billboards, etc. You would suspect that all else being equal, some business we get on the margin will now go to those other forms of advertising. It will also hurt the general economy and that, of course, will hurt our industry. For us, the worst case is where we committed to a sell price but don't have the commitment on the buy side. That is our big concern now.”

Taking a holistic approach, Nadel ultimately has an optimistic view on how the industry can ride out the tariffs. “It is not that big of a deal,” he says. “The vast majority of what we sell is project by project, and we will now get high nets on the goods with a tariff and will have to sell those goods at a higher price as a result. The same will be true for our competition. Also, some goods are not subject to tariffs and not everything we get comes from China. And the pain will probably get spread out through the system. That is to say, maybe the factories in China eat some of the cost, our suppliers eat some, we eat some and the clients pay a little bit more for the goods. It is a headwind, but not a fatal blow by any stretch.

“We are letting our salespeople know that they should expect high nets going forward, but that is it,” Nadel adds. “Clients live in the world too and they know things from China will now cost more. They expect it. It is not limited to our industry. Most of them are buying other things like printers, steel and ink from China and will have the same issues there.”

Follow PPB Newslink for updates on tariffs and more on their impact on the industry.

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