I just read this article on how Amazon is only allowing a 3-5% price increase for products with tariffs of 10%-25%…

I’ve also been noticing over the past decade that for many companies their mid range product sales have fallen off a cliff while entry price point product and premium price point products have increased. These tariffs might accelerate that trend and it may become even more difficult for companies to afford to design and engineer they OPP products on shore while having to pay tariffs, give more to share holders, and minimize price increases. I’ve been advising clients to invest in differentiating their premium products and figuring out some way to make their OPP product unique that is as cost neutral (or negative) as possible.

I am wondering if this is hitting any of us with budget cuts or tighter BOM targets, less factory travel, etc?

On the manufacturing side we’ve been in preparation mode for over a year. We didn’t think it would actually happen but prepared for it. My team on the ground in China has been travelling to factories in Taiwan, India, Vietnam and others to vet factories capable of picking up the ball and running but as most of us know, actual production is only a small part of how we interact with factories. We’ve developed relationships with Chinese factories over the last 20 years - it’s the intangibles we can’t just “replace”. So, to mitigate the delays we’re working on a few cooperative arrangements (still do the R&D here, do the tweaking and prototyping at our partner factories in China then move production to an outside-of-China factory for export from there).

On the product-road side we’re seeing modest damage with OPP products, since the margins are spo slim already but demand for them will surely never go away (and shame on us for ever letting it “be” in the first place, that’s why everything went offshore to begin with), but the MPP issue I don’t really see, maybe it just depends on the industry & margins. The HPP is where we’re seeing the most damage, unless it’s a new industry or our client is a dominating player with little direct competition. Because we add the most value with innovative products and because those products can command slightly higher retail/better margins we’re not being directly targeted as part of the problem.

Sadly though, the correct path here was always policy, not tariffs. Policy fixes problems, tariffs simply put a band-aid on the problem while the pain gets worse and worse - but no one in politics these days seems to be able to swallow a decade plan, everyone wants something that results in quarterly effects. I’m too far from the farming or auto & large appliance industries to see the damage happening right now and I’m not sure when the crunch will really hit home in smaller consumer product categories where we play.

I do know that our clients are being honest, telling their customers that 2020 products will see a bump that will have to be absorbed through MSRP while we are helping them line up options to hopefully avoid that bump entirely.

Re: policy

I just heard a piece on computer spreadsheets effect on the job market.

GOLDSTEIN: A few numbers - since 1980, right around the time the electronic spreadsheet came out, 400,000 bookkeeping and accounting clerk jobs have gone away. But 600,000 accounting jobs have been added.

NPR transcript

I don’t think having industry should be the goal. I’d rather a plan to have better jobs. I’d rather be an accountant than a clerk and I’d rather be a designer than an assembly line polisher. How do we make those things more accessible.

Good points - the labor markets drove where things are manufactured but only to a certain point. Had it not been for corporations only thinking “quarterly” we might be in a much better place today. The US and Canada have always been the leaders in tech so electrical & mechanical engineering and IT will keep good jobs here but the biggest obstacle I’ve encountered when trying to source and/or manufacture here is the “one stop shop” effect - they’re all over China but absolutely none are here. :frowning:

RE One Stop Shops, totally agree Scott. I have found it much easier to find vendors in Taiwan, Korea, and China who will act as a SPOC (Single Point Of Contact) on a manufacturing project. I’ve never found that stateside (actually, one exception, All Jack… and they are owned by a Chinese company). I don’t have the connections in Vietnam but I know most of my friends who do softwoods moved to Vietnam production several years back.

The current ‘waves’ have only affected us to a small amount - ball bearings, maybe a tiny bit on raw metals prices. The next wave puts a direct tariff on fitness products made in China. This will put Johnson Health Tech (who makes the Matrix commercial brand, its good stuff) in a really bad spot.

I still think things need to get much much worse, before they will get better. Anyone know the location of Galt’s Gulch? I thought it was in Colorado…

There is a part of me that is happy. Canada doesn’t have these dumb tariffs on China:)

On the other hand, this is probably a pretty regressive tax that will hit the middle and lower income, which is sad.

Yep, it’s a pain for the manufacturers, a point of stress on the retailers and a tax on the consumers. The effect isn’t going to be anything but playground bullying. We’re not coming back to the US, we’re instead just picking up operations from China and installing them in India, Vietnam and Taiwan - for now. Then going back to China when this is all settled. One client of ours already has operations in Costa Rica so that’s a neutral areat that is only affected minimally (raw materials and hardware coming in from CH), but others are wholly invested in China and can’t get out short term.