Brands weigh options in light of Chinese import tariffs

This third round of tariffs is the first to hit the outdoor industry.
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A cargo ship from China transports products. Tariffs on imports from China take affect on Monday, impacting dozens of industries.

A cargo ship from China transports products. Tariffs on imports from China take affect on Monday, impacting dozens of industries.

The U.S.'s trade war with China has escalated to a point that's becoming a real issue for the outdoor industry, which now faces billions of dollars in tariffs on certain products and materials.

Companies will feel the impact immediately on Monday, when the retaliatory tariffs on $200 billion in imports from China takes effect. Products including travel goods, backpacks and sports bags, bikes, some leather goods, and camping equipment will face an additional 10 percent tariff, and on Jan. 1, the tariff will rise to 25 percent.

"I was having a very enjoyable summer until about halfway through and then the wheels fell off the wagon," Hestra USA President Dino Dardano said. "We’ve been working with our factories and our owners in Sweden trying to figure out what’s the best course of action." 

The Trump Administration is expected to release details on a process for companies to file petitions to remove products from the list. 

"We understand why the administration is working to protect American intellectual property and address Chinese industrial policy, but we felt there was a compelling case as to why knives and tools should be excluded from these tariffs," SOG Knives & Tools COO Darren Dunn said. "We believe there should be opportunity for further review, given the serious impacts of the decision will be felt deepest by U.S. consumers."

The outdoor industry has already experienced a little taste of success in lobbying efforts after helmets and other safety devices were removed from the final list.

Vista Outdoor is pleased with the recent decision by the USTR to remove bicycle helmets and lights and sporting optics from the tariff list," said Rocky Krivijanski, a Vista Outdoor spokesperson. "We know this will help families be safer and outdoor enthusiasts continue enjoying their passions. We are active participants in this process and appreciate the opportunity to share our story on the impact to our brands and our consumers. We continue to work to secure exclusions for our products that remain on the China 301 tariff lists.”

Snowsports Industries America President Nick Sargent also applauded the removal of helmets from the list. In a statement, he said, "Unfortunately, there is still more work to be done as ski gloves, knit hats, and sport bags still remain. These tariffs pose an economic threat to our manufacturers and our retailers, and we will continue to work hard to make sure that these products are exempted from the list."

The U.S. has already imposed $50 billion in tariffs on imports from China, bringing the tariffs to a total of $250 million as punishment for the U.S. Trade Representative's findings of unfair intellectual property practices. China has retaliated with its own tariffs on U.S. exports. And if China retaliates again, President Donald Trump has promised to seek another $267 billion in tariffs, which would cover almost all products from China.

The impact to brands

The potential for blanket tariffs is what NEMO Equipment COO Brent Merriam is most worried about.

"I think it’s going to be pretty negative," Merriam said. "Think about your running shoes—where are they made? China. What about your TV? What about your air conditioner? What about your? Well, you name a product. It’s probably made in China. I just feel like the tariffs will impact U.S. consumers and businesses a lot more than they will affect Chinese consumers and businesses. That’s the most disappointing part."

The Stargaze™ Recliner is a suspended engineered chair that allows the dynamic swinging motion of a hammock with hands-free ‘just-lean-back’ reclining for a relaxed view of the night sky or upright socializing around the campfire.

The NEMO Stargaze Recliner series could rise up to $50 in price.

For NEMO, the Stargaze Recliner series could get more expensive. While some parts come from Korea, the chairs are ultimately manufactured in China and it's not a simple task to switch manufacturers. In Hestra's case, two factories are in China and two are in Hungary and Vietnam. Dardano said they were in the process of shifting out of China over the next few years anyway, but he's feeling forced to do so earlier. And now NEMO is also considering adjusting supply chain out of China. 

The tariffs will no doubt lead to more expensive gear eventually, but for 2019, brands are absorbing the costs. For Hestra, that's around $250,000 this fiscal year. And for Trek Bicycles, it's around $30 million, Bicycle Retailer reported

"Outdoor products such as bikes, gloves and backpacks already face import tariffs as high as 20 percent, and these additional taxes will only raise costs for outdoor companies and consumers, hamper innovation and job growth and prevent more Americans from getting outdoors,” Outdoor Industry Association's Amy Roberts said in a statement.

Because prices for 2019 products were set last year, it's unreasonable for brands to return to clients and raise prices this late in the game. But come 2020, Dardano said he'll likely be adding an asterisk next to prices that says, "prices are subject to change based on the current economic situation with the tariffs."

"We’re going to plan for the worst and hope for the best," Dardano said.

Hestra's Heli glove could become more expensive.

Hestra's Heli glove could become more expensive.

Merriam said NEMO has already communicated with key accounts about the fact that the Stargaze will be tariffed. In order to maintain margins, NEMO would have to charge $50 more for the now-$220 NEMO Stargaze Recliner Luxury. But Merriam said that is not an option and they are looking at a range of possibilities, which includes developing a new supply chain and working with retail partners to share the impacts of the tariffs to allow both parties to maintain MSRP’s.

In order to keep margins for Hestra, Dardano said he'd have to charge $40 more for the popular now-$145 Hestra Heli Gloves. He's hoping to keep.

"Even though the price points will be higher, maybe people will be more focused on buying higher quality products," Dardano said. "As consumers in the U.S., I don’t think that’s a bad thing."

But he added, "That’s one side of the coin. Then the other side of the coin is the impact to our industry. How this is going to affect the family of four that wants to take their kids skiing and they have to buy new ski gloves...The last thing we want to do is keep people from getting outside and enjoying the outdoors."

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