The Trouble with Tariffs

If you keep up with the news, or even if you don’t, you’ve no doubt heard about the tariffs imposed on the import of Chinese goods, including all lighting manufactured in China. We’ve already felt the impact of the first tier, imposed on Sept 24, 2018; not fun, and quite chaotic for everyone.

Well, we’ve all made it through the first implementation, albeit with some residual confusion and perhaps a little resentment. The G20 Summit meeting last month between Trump and Xi was supposed to give everyone clarity and a resolution to the ratcheting up of tariffs on both sides.

1.No deal, and 15%  additional  tariff is implemented 1/1/2019.

2.A deal, we stop at 10% already implemented.

3.A great deal, and we roll back the 10% and forget this ever happened.

What a surprise to learn there was yet another option, #4, where we delay the implementation of the next 15% for 3 months, kicking the proverbial can light down the road until end of February 2019. That was what was agreed upon in discussions, with no formal agreement signed at the meeting. That is, until the arrest during the G20 Summit of a very high profile Chinese national, Sabrina Meng Wanzhuo, CFO of Huawei, and the subsequent denial by the Chinese government that a deal had even been reached to delay the tariff implementation. By the way, if you don’t know about Huawei, look them up and you will understand why the verbal deal Trump made with Xi at the G20 went sideways for the Chinese.

So, as we head into 2019, where does this leave us? I think it’s business as usual with the standard price increases from the vendors that were unrelated to the tariffs and we wait…again…

I am always looking for the upside of the issue, so what could possibly be the upside of an uncertain tariff war with the terms hanging in the balance for the foreseeable future, and the subsequent passing off of existing price increases down the line?

First, this is an imposed price increase across the board, so all prices are going up on Chinese imports, not just a few manufacturers. There is no blame within the industry.

Second, it is pushing vendors who do business in China to examine their processes and look for alternatives to the current status, and they are looking in other countries. These countries may have challenges, but they are different than the ones we experience with our complex relationship with China.

Next, it gives a nice profile to US companies, like Hi Lite Manufacturing, (sorry for the shameless promotion, but it is my blog) who has manufactured exclusively in the US for 60 years, and the prices from US manufacturers look more reasonable every day the tariffs abide.

Lastly, this is a lesson to all of us of the interconnectedness of countries who trades with one another and how important it is to understand the fragility of these relationships, and that we must think constantly be innovative and consider alternatives to ‘business as usual” and ways to come to market as the world order changes.

So, we wait…with a fresh perspective on politics and trade, and an understanding that we must adapt and plan for change, even in the face of the unknown. We must realize and accept that we have little influence over major trade negotiations as a lighting vendor, retailer, or rep. We do, however, have control over how we operate our businesses, how we have conversations around product procurement, and how we choose to grow our businesses. The rest we must sit with, and it’s maddening, but the truth. Stay tuned!