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I have been reading so much about the tariffs being imposed against imports from various countries and am a bit confused by the reasons and the results. I understand that if we import less, then we might build it here, and we then have an increased labor force.
I understand that some nations have been flooding our country with imports for years. But does this make them bad?
China is a main target of our tariff war, and the Chinese have now raised their tariffs in like amounts against our products going to China. This may have a tremendous impact on our farmers and the entire agriculture industry. We sell soybeans and corn in the millions of tons to China each year.
Why? Because we have fertile land and have developed better seeds and techniques. We can produce more than we need locally. So, we sell to other countries that are not so proficient or have less success be it the soil, the weather or the methods. They need our grain.
But isn’t this true in other industries? Sure, to reduce the imported cars will help Detroit and all the manufacturers. But so many of the parts that go into those cars and trucks come from other countries. While it may encourage the American manufacturers to start making those parts domestically, two things happen. First, the country that makes them now will have less income from abroad and will buy less from us.
At the same time, the bottom line is that the tariffs on these parts, if they do come in, will raise costs of the goods significantly to us. Even if we want to start manufacturing them, can we do it as cost effectively? There may well be higher costs as our labor costs far exceed those of other nations.
Another thing to consider is that if these tariffs remain in place, the price of the imported object or part will raise the ultimate price. So, who eats the increase? If the foreign shipper does not reduce his price, then either the importer does, or he passes it right on to the American consumer.
And who benefits from this tariff price increase? It isn’t the foreign producer. It isn’t the wholesaler. And it sure isn’t the purchaser. All the tariff proceeds go straight to our government. It is just like a sales tax.
Is China the most proficient in producing many of the products we buy every day? TVs, telephones and computers are now quite affordable. And that got me thinking. What industrial methods are so efficient in China that there are no real competitors who could make the product and sell it at a comparable price. Can and does American industry even want to enter these arenas?
This brings us to the main part of this inquiry and discussion. How will these tariffs affect the toy industry? Who makes the toys? One example is the toy construction kit of Lego bricks. They are manufactured only in China, Mexico, Hungary and Denmark. Not the U.S. So, every Lego is imported. I have learned that this is true with almost every toy our children play with.
I recently read that 96% of toy companies are small businesses. Yet 50% now say that they will be out of business before Christmas because of the costs associated with the China tariffs. In all, 80% of them have already delayed orders, and 60% of them are canceling orders already placed.
This seems pretty grim, but there are very good reasons. Take for example something made almost exclusively in China and often considered a toy: headbands - a product that nearly every girl and woman owns. A wholesaler who orders from China used to pay about $5 a band and would sell to the retailer for $10. The retailer would then charge their customer $20 for said headband. Under the new tariff, the same headband could cost the ultimate customer almost $50 apiece!
Many of these small companies are canceling orders, as they see no way to sell their products after calculating the prices that they would have to charge to cover the tariffs. These changes and canceled orders of such products, especially toys, are creating a huge hole in the retailers’ inventory and will certainly affect availability this upcoming Christmas season as stores struggle to keep shelves stocked and still make money.
One small business owner designs women’s and girl’s accessories. She then sells these retailers her products, including cosmetic bags, purses and hair accessories (including the aforementioned headbands). Of her purchases, 85% of these products are manufactured in China and not in the U.S.
The reason for singling out this industry is that my daughter opened her business a decade ago and started off strictly designing headbands. Her product came from China as no one else made them. She has since grown that business to include various other products along the lines of personal items and toys. She has moved from her basement to an office building with half a dozen employees. She is now recognized nationally and is invited to trade shows all across the country.
China will not or cannot lower its prices, so if the end product becomes unaffordable to the ultimate consumer, her retailers won’t buy from her as they cannot make the retail sale.
My daughter’s business is one of thousands of small businesses that will die if it can’t afford China purchases. The original manufacturer will suffer with lack of sales to the wholesaler, the wholesaler will not be able to sell to the retailer and the ultimate consumer will have to spend money on necessities and not on the new overpriced extras. Not a happy result for anyone.