U.S.-CHINA FIGHT RAISING FEARS OF OUTDOOR FIRMS
Taxation stemming from trade dispute with China hurting U.S. businesses
Tariffs aren’t a usual topic at the Outdoor Retailer show in Denver, but some small-business owners in the industry worry about the future of their firms in the aftermath of the U.S.China trade dispute.
Tariffs aren’t a conversation topic you’d expect at the Outdoor Retailer show, but it’s one that’s having a signif icant impact on the outdoor recreation industry.
So much so that some small-business owners in the industry are worried about the future of their companies.
Items on the third list of tariffs in the escalating trade war between the U.S. and China are of concern to outdoor recreation companies, said Rich Harper, the Outdoor Industry Association’s manager of international trade.
“Most outdoor products escaped lists one and two,” Harper said Thursday during an association event at the Colorado Convention Center.
But the third round of tariffs on $200 billion of imports from China includes leather ski gloves, backpacks, camp stoves and chairs, bicycles and kayaks. An additional 10 percent tariff was imposed on the products Sept. 24 and that will increase to 25 percent at the end of the year, Harper said.
One success was exclusion of snowboard and bike helmets from the list.
“Tariffs are essentially taxes, so additional taxes means the costs for outdoor companies are going to go way up,” Harper said. “They’re faced with the decision right now whether to absorb that cost or pass that cost on to the consumer.”
However, many retailers have already set their prices for 2019, so they will have to ab- sorb the increases. Harper said some outdoor recreation business have estimated that every additional $1 in tariffs converts to an additional $4 in retail costs. Higher tariffs will also likely translate into fewer jobs filled, he added.
What keeps him up at night, Harper said, is the potential for more tariffs, which the Trump administration has said could be levied if China retaliates. More than $260 billion in additional tariffs would inevitably include footwear and apparel: hiking boots, trail-running shoes, ski jackets and rain coats.
So far, Salewa North America, the U.S. subsidiary of the Italian-based Salewa, hasn’t been as affected as other companies, but higher duties on footwear and apparel would have a big impact, said Drew Saunders. The company’s four brands include products ranging from ski boots and running shoes to rock-climbing equipment and technical and casual apparel.
“We sell apparel on a seasonal basis, so we have offered all our samples for fall 2019,” said Saunders, country manager for Salewa North America, which is headquartered in Boulder.
Because the prices have been set, the company would likely absorb the cost of higher tariffs, but eventually have to pass them along to customers. Salewa is looking for vendors in other countries, but Saunders said shifting even a portion of its business could take years.
“China is such a large country, has such a significant manufacturing base for apparel and footwear, there’s just not the same volume in other countries,” Saunders said. “It’s not like there are dormant factories just waiting for work in Vietnam and other places.”
In some cases, Harper said outdoor companies trying to shift their supply chain might end up with a lower-quality product or be forced to discontinue products altogether. More than 90 percent of many outdoor products are manufactured in China, he added.
“We’ve heard from a number of members in the past few weeks that they’re concerned if there’s no relief in sight that ultimately they’ll have to go out of business, particularly those that are small- or medium-sized,” Harper added.
Industry representatives are talking to members of Congress and federal officials to make their case against more tariffs or exempting outdoor products from the list of targeted imports. Harper said he understands the tariffs are intended as a way to get China to stop the theft of American intellectual property, but that issue doesn’t apply to outdoor recreation products.
“It’s very challenging,” Saunders said of the fallout from the trade dispute. “It’s a major distraction and a lot of uncertainty.”