12 volt suppliers are in mixed stages of preparedness for a possible tariff hike on many Chinese electronics to 25 percent, up from the current 10 percent.
President Trump said over the weekend that he planned to raise the current tariff from 10 to 25 percent effective this Friday, May 10, on Chinese products including amplifiers, some car radios, car cameras and HID lights.
The industry’s own Alex Camara, CEO of AudioControl was quoted in a story in USA Today speaking on the existing 10 percent tariff, “We’ve primarily absorbed the cost, which has been painful.” But a 25 percent tariff would be “impossible to absorb,” he said. “10 percent has hurt our margins, but 25 percent is a severe impact.” And with the higher tariff slated to take effect Friday in only a few days, he said “You can’t even plan for that.”
Camara estimated that the tariffs could add 8-12 percent in costs to build its products, although AudioControl has been absorbing costs to date and reducing its own margins. This is true even though 90 percent of it products are made in the US in Seattle due to tariffs on Chinese components.
Alpine said it has a plan in place in the event of a 25 percent tariff that “we will announce to our dealers when appropriate,” said a spokeswoman.
Epsilon, maker of Soundstream and Power Acoustik, said if the tariff moves to 25 percent it will have no choice but to raise prices immediately, according to VP Sales & Marketing Paul Goldberg.
At least one supplier, Race Sport Lighting, said it moved a small amount of its LED sourcing to the US, and that it would look into moving more of its supply chain to the US if tariffs move up to 25 percent.
Similarly, NAV-TV, which manufactures in the US, said its contract manufacturing business is up by almost 50 percent as more companies are using its facilities to avoid tariffs.
Trump’s tweet announcing plans for the 25 percent tariff caught US industry and Wall Street by surprise. Many pundits speculated the tweet was simply meant as a bargaining tactic as China officials are coming to the US for talks later this week.
But if enacted, the higher tariffs would hurt US retail sales and the overall economy, said leaders across many industries.
“Tariffs are taxes,” wrote the Consumer Technology Association in a statement by CEO Gary Shapiro. “The president is seeking a better trade deal with China. But he must understand the Chinese don’t pay for these U.S. tariffs – American families, workers and companies pay for tariffs.” The new tariffs on just 5 days notice would “roil our markets, damage U.S. businesses and do serious harm to Americans’ retirement funds and pensions,” he added.
Smaller car audio companies such as American Bass said they were left hoping for cool heads to prevail to avoid the tariff hike. “As far as amplifiers, we would move over to Korea,” said Bob Ahuja, President of American Bass. “But to be honest with you…I don’t think it’s going to happen; there are too many big companies out there…if it goes to 25 percent it will effect the whole economy.”
Some argue the 10 percent tariffs on $250 billion in shipments from China, have had little effect on the economy. The tariffs reduced growth by only about a tenth of a percent for 2019, said USA Today quoting Oxford Economics. But moving to 25 percent tariffs would triple the impact to 3 tenths of a percent which could shrink growth and result in almost 1 million lost jobs. It would cost each US family about $770 a year, said a study by the Trade Partnership.
“A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact,” said David French, senior vice president of government relations for the National Retail Federation. “American consumers will face higher prices, and U.S. jobs will be lost.”
Trump also threatened to impose 25 percent tariffs on an additional $325 billion of Chinese goods “shortly,”which would comprise almost all Chinese imports.
Top image via CNBC.com