Understanding the true impact of the tariff increases

by Bryan Kilpatrick

Tariffs are an unfortunate part of business for companies who import products from outside of the United States. In an attempt to drive companies to buy within the confines of the U.S., the government within the past year has imposed two sets of tariffs—first 10 percent and then, most recently, 25 percent—on certain goods manufactured in and shipped from China. These increases seemingly leave a lot of room for interpretation and many companies use that ambiguity to, quite frankly, take advantage of their customers. 

Unfortunately, we’re seeing that last part manifest itself within our own industry in a few different ways. One is that some companies are taking the 25 percent tariff and adding it to their retail price. For example, if a company was charging $100 for a banner stand prior to the tariff increase, they’ll now be charging $125. The issue with that is the company is only paying, say, $30 for that stand to be manufactured and shipped to the U.S., which means the tariff on it should only be $7.50 (25 percent of $30). So, they’ll be profiting $17.50 per stand at the expense of their customers behind the guise of a 25 percent tariff that is certainly very real but, in this case, unnecessarily applied to the retail price, which should now be only $107.50 if they were capturing the tariff correctly.

Another thing we’ve seen is companies applying the tariff increase in an all-encompassing manner that includes products not even manufactured in China. One company has blanketed 25 percent increases on all of its products, even ones that come from Korea, and those aren’t affected by the tariffs. Another insists that its graphics, which are printed domestically, are affected by the tariff and thus have become more expensive.

At Power Graphics, we don’t believe in passing unnecessary costs on to our customers. When the 10 percent tariff was announced, we absorbed the added costs on our line of products. While that isn’t feasible with the 25 percent tariff, we’ve ensured that our prices will only be adjusted to reflect the additional costs we’ll incur. Plus, we’ve added a built-in feature to the back end of our website that will automatically adjust prices back down if/when the tariff increase is recalled.

However, since we offer products from a wide range of manufacturers, the actual amount added to the wholesale and retail prices of those items due to the tariff increase may appear to be inconsistent. This is because each manufacturer is passing on anywhere from a portion of the increase to an amount that, as explained above, goes beyond the actual tariff cost. As a result, you may see a $100 product with $10 in added tariff costs from one manufacturer and a similarly priced product with $20 tacked on from another. Just know that this isn’t a mistake, and that it’s actually an example of the kind of practices explained above.

The tariffs and all of the effects associated with them are complicated and difficult enough as it is, so the last thing a business should do is compound the situation by asking for even more money from their customers. We hope this brief article gives you enough information to know what to watch for when shopping for display products and graphics in a post-tariff economy and make the most financially sound decision possible.

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