Made in USA Products Feeling The Burn
With the $600 billion in estimated tariffs against Chinese imports, you might think made in USA products will be easy like Sunday morning. Well, that couldn’t be further from reality. In fact, Chinese and American manufacturers, retailers, and economy experts all agree these tariffs are pretty much bad news for everyone involved… including consumers like you. For products manufactured here in the United States, the impact hits a little too close to home by possibly impacting the cost to operate or even create their goods, facing retaliations from the Chinese government, and even facing another recession.
At first thought, some may think that adding a 25% duty to imported Chinese goods would not have much of an impact on goods created inside of the country and might even help those businesses who make and create their products on US soil. If retailers have to pay more to use Chinese goods, wouldn’t they just starting using American goods instead? Nope. These tariffs are actually setting up to make business operation more difficult almost from the get-go for made in USA products and for many reasons, the first is simply the cost to operate.
It’s simple. An item manufactured in America may not be created entirely from American made materials. Components of the item, parts needed to operate the machinery, or even materials needed for day-to-day operations could be subject to the tariffs, all affecting the bottom line. A business might create a heating and cooling system in the United States, but their air and gas compressors are imported from China. An excavating company might purchase their cranes from a manufacturer in Beijing. You get the idea.
There are literally hundreds of items on Trump’s tariff list that could impact the day-to-day operation of an made in USA products and their ability to sustain profitability. If the business owner creates their product in the United States and exports to China, they could suffer even more financial consequences. Just ask an American soybean farmer, and they’ll give you the “dirt.”
To those famers, China is their number one customer. As a retaliation for Trump’s duty tariffs, China clapped back with tariffs of their own. While soybeans in the US are more like a niche food for vegetarians, vegans, and babies with milk allergies, China almost considers soy a delicacy, and now they’re being slapped with their own Chinese tariffs. American soybean farmers were already devastated by recent trade war events but now fear China will no longer even consider them as a reliable source for produce. In fact, the soybean industry already suffered a 4.5 percent point stock market loss last month which is one of the worst they’ve seen in industry history.
Economy experts say that’s not even the worst to come for made in USA product manufactures. The Beijing tariff clapback is taking their tax war game to a whole new level. In addition to imposing tariffs on Billions of dollars worth of American made products, they are actually cutting tariffs on non-US imported goods. This move not only positions our competition to take over permanently, but seemingly positions China to weather the hard times of a trade war with the United States. Meanwhile, some economists are warning Americans to hunker down for problems of their own.
The retailations from Beijing coupled with the increased cost to operate are creating the climate for more than increased prices on consumers, but could even lead to another possible recession. Retail giant Walmart is already warning Trump and consumers that these tariffs will cause prices to rise. In a recent letter to Trump, they plead, “As the largest retailer in the United States and a major buyer of U.S. manufactured goods, we are very concerned about the impacts these tariffs would have on our business, our customers, our suppliers and the U.S. economy as a whole.”
Unfortunately, there are limited options in how our economy will respond to these tariffs. Who foots the bill? Retailers could absorb the cost, suppliers might feel the pinch, or consumers might pay more which means, they’ll shop less or just stop buying all together. Pick any one of these options and magnify it on a grand scale, and you’ve got the perfect start to recession ‘19.
For made in USA products, the trade war with China is definitely a concern. Between the increased cost to operate or purchase needed materials, the Chinese retaliations, and the poor economic climate recipe for disaster, many manufacturers are already working to prepare for what’s to come. During a time of year when they should be preparing for the Holiday bottom line, they are instead preparing for survival of the business fittest. Will your favorite American businesses survive? Stay tuned for the next episode of “Trump vs. China: The Ultimate Trade Battle Royale.” In the meantime, shop local.