Adapting and Thriving: Navigating the Shifting Tariff Landscape. A Word from Our CEO, Dan Oas
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Tariffs and High Caliber
Tariffs have been a major topic of conversation in our industry lately and have even tanked the stock market. With changes happening every week, there’s been a lot of uncertainty, which markets hate. No one really knows the final % of tariffs China or other countries will have when this is over. Early signs are a lot of countries are coming to the negotiating table.
What I do know is that we are sitting on the largest amount of inventory we have ever had. We pushed our suppliers, especially in China, to ship as much product they could prior to April 2nd. We learned that any container “on the water” on or before April 5th, is not subject to the April 2nd tariffs. This is why it is not necessary for us to increase prices at this time.
Our plan is to:
1. Hold pricing at least until May 1st so we see the impact of the tariffs and any negotiations from it. We may not increase pricing depending on the outcome.
2. Any orders for in stock items sent prior to May 1st, will not be impacted.
3. If tariffs remain at the April 2nd level, we may do some price increases on the inventory received at higher tariffs. We will not do a general or across the board price increase.
4. Overseas direct orders will be assessed individually, as they are likely to be impacted the most.
What We're Seeing Globally
Chinese suppliers are moving quickly to set up operations outside of China, the biggest recipients are Thailand, Cambodia and Vietnam. Chinese factories understand the supply chain and will be in a position to move quickly. I believe that these countries and India will lower tariffs, but some, like Cambodia, might have a harder time of it.
Why did Cambodia have a 49% tariff? Cambodia imports about $264 million of US goods and exports $10.18 billion to the US. The formula the Trump administration is using is:
$10.18 billion - $264 million/$10.18 billion = 97.4% then half of that comes to the roughly 49% tariff for Cambodia.
So, it is not just about lowering tariffs in other countries, they have to import more US goods. I believe this formula will play a major role in the negotiations between other countries and the U.S. A small poor country like Cambodia will have a difficult time meeting these requirements.
It's also worth noting that at least 60% of raw materials used in factories in Thailand, Cambodia, and Vietnam still originate from China. Most Chinese factories that move to these or other Southeast Asian countries will use their supply chain out of China. This could be another part of the negotiations the US may have.
-Dan Oas
CEO High Caliber