White House Levies Further Tariffs On Approximately $200 Billion In Chinese Imports

On Monday, the White House announced that the President had directed the United States Trade Representative (USTR) to move forward with additional tariffs on roughly $200 billion in Chinese imports. The tariffs will go into effect on September 24 and are set at 10 percent through the end of the year and will rise to 25 percent on January 1.

The tariffs are a result of the Section 301 process the USTR is pursuing in response to its conclusion that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property. The Administration has noted that it would pursue the next phase of tariffs, affecting approximately $267 billion in additional imports, should China take retaliatory action. China announced retaliatory action earlier today, stating that it would levy new tariffs ranging from five to 10 percent on $60 billion in U.S. products, beginning September 24.

“It’s important that in the face of this, distributors and suppliers come together and say ‘here’s what we’re seeing, here are our product cycles and here’s what we forecast for 2019,’” says Todd Pottebaum, MAS+, president of distributor Quality Resource Group, Inc. and PPAI board member. “Everyone wants to run a lean and profitable business, but there are very few people who have the luxury of really strong margins, so any increase, especially 10 or 25 percent, is going to affect them.”

Pottebaum adds, “We can have some proactive discussions with our clients about what’s happening in the political environment. But from the distributor’s perspective, we need to hear from suppliers whether they’re content with what they have in the warehouse now, are they content with how that’s priced and what their product cycles are with bringing inventory in, and when are they really going to be affected. Is the 10 percent going to impact them immediately or is more likely that they are going to see more of those effects in first or second quarter next year?

Larry Whitney, director of global compliance at supplier Polyconcept says, “Our president David Nicholson announced that we are not raising prices on products through end of the year. In January, we’ll see what happens. Obviously, it’s a significant increase in our costs and we’ll have to make adjustments. For everyone in the industry you need to get the word out to members of Congress, the White House and the Trade Representative’s office to let them know how much it’s hurting our business. We depend on foreign products, but we do a lot of value-add in our U.S. decorating and they bring value to U.S. businesses through advertising. Arbitrary tariffs are not good for our country nor our industry. It’s going to take everyone to get the word out.”

PPAI’s 2018 Product Responsibility Summit, just concluded in Alexandria, Virginia, addressed tariffs as part of its Strategic Foresight presentations with trade experts from FedEx providing guidance for members, and offering projections and details on the process.

“So far, the tariffs haven’t really touched our industry, and while we’re concerned about these new tariffs, I think a lot of us aren’t aware of what to do yet,” says Chris Vernon, MAS, CEO of distributor Vernon. “I don’t have all the answers and I’ve spoken with a lot of friends here at Summit and we’re all just figuring it out as we go. What I’m most fearful about is not really the price of our goods, but how it is affecting our customers. If their cost structure changes and they can’t afford to spend as much, demand for our products goes down. It’s not so much that our products have gotten more expensive, but their business has been harmed by the tariffs and they’re customers have gone away.”

He adds, “We’re concerned but we haven’t heard much from our clients. From the suppliers we’ve spoken with, the supply chain is very difficult to replicate. You can’t just lift it up and establish it somewhere else. We’ve started putting things on purchase orders warning of potential tariffs and working with our people to bring them up to speed.”

Bill Mahre, president of ADG Promotional Products says, “This is still evolving. Our biggest product line is pens and it’s not affecting us there, but it will affect us in other categories. We’ll have to gather the HTS codes and see which ones are affected by the tariffs. It’s a very complex process. The hard part is you’re talking about raw goods, so it doesn’t impact our costs immediately. We have to be careful, so we don’t overreact and raise prices 25 percent just because of the tariff. It hasn’t affected our prices yet but it’s going to be a significant impact. Preliminary results were well into six figures. There’s going to be a lot more discussion about this.”

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