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Negotiating tariffs

How are you coping with tariffs? Say what you will about the current American administration, but for @EquipManufacturers and @EquipSuppliers, every week and every tweet seems to bring a new adventure…some of them, namely tariffs, make for an especially wild ride. Importers, how do you get your goods to market while still hitting margins that keep food on your plate?

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Tariffs may be something we’ll simply have to get used to in this country. It may be better to simply price them into the cost of doing business. I don’t see them going away anytime soon.

In the event that there is a cessation - they could easily be reinstated at the same, if not higher levels.

May be better to plan for a storm that never comes - (yep - that’s a straight up reference to Noah’s Ark) - rather than realizing you should have been cultivating a plan for survival all along. :canoe:

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We have had to build in the increase to the price of our products. We calculated 30% on an increase to our costs, then added that to our retail. The retail increase averaged about 10%. I don’t want to get political, BUT, tariffs hurt! American farmers have been especially hard hit. Manufacturers have also been hit. Even though marijuana isn’t exported, I suspect hemp is or will be. It will no doubt affect that. China is paying nothing. American importers are paying the tariffs, in full. In fact, the trade deficit with China has actually grown. China is winning the deficit war. Trump may well be a brilliant real estate guy. He may be television’s gift to reality programming. He is not an international trade wizard. Every grower does in fact buy machinery, parts, ancillary gear from China. Everyone is affected, and it’s all negative. For now, build it in. We have found the end user expects it. Don’t take a hit and act as if it’s all okay. Tariffs will only go away when enough Americans scream about it. They won’t go away because China gives in.

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Great post, @thomas! I appreciate your insights!

How long until we hear the screams of anguish?

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As a manufacturer working with commodity products, tariffs and “duties” are costs that we always have to keep a close watch on, especially when profit margins are thin. China and the US are holding off on tariffs hikes for the time being, which is good news, but Malaysia is now talking about a new tariff on natural gas between now and the end of 2019. Shipping containers may get more expensive in the next few months as the sulfur output of those liners must be modified to a low-sulfur fuel system or the tankers must install “scrubbers” to combat these pollutants. All of this adds to the cost of goods, from raw products, to fuel, to shipping charges. Even exchange rates have something to do with commodity costs.

So, tariffs are one element, but many factors contribute to a final price of goods once they arrive in the United States. While many factors are at play, Sempermed communicates any key pricing indicators regularly to our container customers so that if/when there are pricing adjustments, there are no surprises and the customers understand that everyone is in the same boat (almost literally). Container customers accept a more real-time cost of goods.

In another example, Malaysia at times can add/take away duties for some products. If we charged a 3% added duty for an item, and before the shipment arrives Malaysia removed those duties, the 3% is refunded to the container customer prior to the final invoice.

Also, all of Sempermed products in our distribution centers (pallets vs container orders) are priced based on blended inventory costs. So if we landed Item1 in July at $20, and we landed the same volume of Item1 in August at $30 and we still have all of the July shipment in stock… the new pricing for August would be $25 per each Item1. This is oversimplified, of course, but you get the idea. Blended inventory costs help us ensure that increases and pricing decreases are fair and reasonable for all parties.

With commodity items, keeping pricing fluid is essential. Container pricing is month-to-month and pallet prices are blended, so they can hold for months at a time if needed, but never years. Just like gas or milk, you can’t guarantee a cost long-term, but treating your customer fairly and with open communication helps to create trust and long-term business. Even if the pricing can’t always be guaranteed, good faith and customer trust/loyalty can be relied upon and they accept the costs provided, even if they come with an increase. They REALLY like us when we pass along decreases without being asked.

I know commodity items (like disposable gloves) aren’t the same as some of the more popular products in this industry, but I hope this helps in some way.

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Fair is fair. We are at a major loss to businesses moving over seas because it cheaper to manufacture and ship back here than it is to manufacture here.

So here is my thoughts: Lower the tariffs the US is charged OR raise the tariffs of those who import here. It affects everyone the same. So ultimately I would like to see tariffs lowered…but as long as they are even I am all good.

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