Tariffs Likely To Change Client Conversations, Distributor Say
Earlier this week another round of tariffs on roughly $200 billion in Chinese imports was authorized by President Trump through the United States Trade Representative’s (USTR) office. The tariffs, which go into effect on September 24, are set at 10 percent through the end of the year and will rise to 25 percent on January 1, 2019.
The tariffs are a result of the Section 301 process the USTR is pursuing in response to its conclusion that China is engaged in numerous unfair policies and practices relating to United States technology and intellectual property. The Administration has noted that it would pursue the next phase of tariffs, affecting approximately $267 billion in additional imports, should China take retaliatory action. China has announced retaliation stating that it would levy new tariffs ranging from five to 10 percent on $60 billion in U.S. products, beginning September 24.
Some suppliers have already said they would not raise prices on products through year end; others are taking a wait-and-see approach but regardless, these tariffs are likely to affect the conversations distributors are having with their clients on orders scheduled this year and next.
Brian Grall, chief creative officer at distributor MyLogoBiz.com, says, “A ‘no surprises’ motto is best when developing client projects. Relying on open and honest communications with clients is important about all material aspects of their project. Product price, and in today's global environment, including the potential tariffs impact, is just another discussion point. It’s especially so with overseas projects, as well as the likely impact on domestic projects.
“Besides the looming tariffs, artwork charges, freight costs and the fees for various options (second color run/setup charges, optional packaging, multiple drop ships, copy changes, etc.) should also figure into the regular client conversation. My recommendation is if you have not already begun the conversation with clients, make tariffs a part of your normal ‘no surprises’ conversation with clients. For overseas projects, definitely quote with the potential pass through for any additional tariffs.”
Rama Beerfas, MAS, owner of distributor Lev Promotions, has similar thoughts. “I’ve never specifically addressed price issues like this in the past unless I’ve been questioned. Most people know when prices are on the rise and why. I doubt anyone is naive enough to believe that manufacturers will simply absorb higher costs whether they come in the form of tariffs, raw materials or labor. If I'm questioned on pricing, or I know that a price increase will affect my client’s budget, I simply explain or remind them about the underlying cause (which they’re seeing in other aspects of their life as well) and review whether we need to look at other options like alternate products or reducing quantities. No matter how unhappy with the situation they may be, clients get why it’s happening.”
Follow PPB Newslink for updates on tariffs and more on their impact on the industry.