Whose Duty is It?
Typically the pages of the Utah Adventure Journal are filled with inspiring stories of adventures around our fair state and beyond, as it should be. This story is not one of those. Instead, this tale is about one of the driest topics known to man: import tariffs. But bear with me a bit here; whether we like it or not, and whether we try to ignore national/international politics or not, the recent news about tariffs and trade wars has the potential to affect all of us who love to recreate.
If you play in the outdoors, the odds are approximately 100% that you use products that are made in China. The reason that outdoor companies make products in China is that – like all other consumer product companies – they want to get the best product made for we demanding athlete-customers that is at least marginally affordable to those customers, while enabling a profit both for their company and the retailers (such as REI and Wasatch Touring). To do so, the companies like Patagonia, Nike, Black Diamond, La Sportiva, Mountain Hardware, and many more have been able to take advantage of China’s relatively bottomless supply of workers, an economy with a much lower cost of living, and a decades-long zeal for building an infrastructure conducive to mass production. But inherent with that Chinese production are….tariffs.
Tariffs -or “duties” (the terms are generally interchangeable) are taxes that a company pays to the US government when they import a product. The amount that a company pays is based on one of the most arcane and complex documents ever created: the “harmonized tariff schedule” was clearly created by an ancient bureaucratic soul straight outta Dante’s Inferno that assigns a code with an associated percentage on every single product imported into the US. While there is very little logic to the codes, they have been in place since the beginning of time, so companies have been able to easily account for them. Their shoes or tents or sleeping bags hit the Long Beach port, the absolutely soulless and humorless customs agent inspects the shipment and confirms the customs code, and Patagonia/Nike/Mountain Hardwear gets a bill for what is essentially a tax. This expense is built into the price structure of the product that we pay for the goods, but at least it’s been consistent over time.
Until now. Showing that he lacks a basic understanding of macroeconomics, President Trump has initiated a trade war with China, threatening to tack on an additional 25% tariff on all imports from China. However, the actual penalty is not to China’s government nor the Chinese factory owners, it’s to American companies and ultimately to American consumers.
Salt Lake City’s Black Diamond Equipment has recently introduced a line of rock climbing shoes, and based on the success of that launch they are introducing new approach shoes in Spring 2020, with plans for additional mountain-oriented footwear in subsequent seasons. But BD’s new Footwear Category Director, Derek Gustafson, says: “This potential tariff deal has huge implications for us. All we can really plan for is the existing status, and it’s nearly impossible to plan for the uncertainty. If this goes down, we’d have to absorb the cost, substantially raise retail prices and/or move our production out of China to Vietnam, Indonesia, or Cambodia. All of these choices negatively impact our ability to compete. Since all the other companies would be in that exodus and we are just a small fish in the pond, we would be in danger of getting shut out.” Black Diamond has a broad product line and does do some production in Salt Lake, but their long relationships with their Chinese partners drives a large part of how they do business: the design, development, production, and quality control of the products is dependent on the abilities of their suppliers, and as Derek says: “We can’t just flip a switch to change our production. And even if we tried to make our shoes in the US, there are literally no factories that could make our shoes here.”
The idea of increased tariffs is to incentivize American companies to use American labor. And for sure, there are companies in the outdoor realm that have bucked the Asian-source trend. Locally, Voile USA has made all of their skis, splitboards, and hard goods in West Valley City for over 30 years at competitive prices, and Alta Racks is a competitor to Thule and Yakima and does all its manufacturing in Salt Lake City and welcomes the tariff increases, according to a statement on their website. But companies that focus on products that require a lot of handwork (like the sewing that is necessary on tents, sleeping bags, shoes, and of course clothes) are reliant on less-expensive labor.
But wait, you say. I try to buy my groceries and beer locally; why shouldn’t the companies I buy outdoor products from also “buy local?” The truth is that they would like to, but it would mean that even if they could be made here – which they can’t – a pair of running shoes would probably go for $300, which simply wouldn’t fly in this country. For reference, Patagonia boldly introduced new fishing boots this year that are 100% made in the US by the Danner Boot company, and they are going for $445.
In addition to price inflation, a huge jack in tariffs could even make these companies and the retailers disappear altogether. If the companies get hit with unforeseen costs they have to raise their prices and thus demand could drop, which creates a vicious circle of cash flow for future operations that could ultimately jeopardize their existence. And the independent local retailers, already struggling with a challenging environment, would face the same challenges.
There are many national political issues that get a lot of media play but the reality is that most don’t affect our daily lives. But a trade war could have a big impact on all of our purchasing decisions. So what are we to do? The Outdoor Industry Association has already sent a powerful statement to the White House, but pressure from our surprisingly powerful congressional delegation – that purports to be very pro-business – could potentially come to bear on the president’s proposition. If you feel strongly about this, contact your congressman’s office and/or Sens. Romney and Lee. And take good care of the gear you have; the replacements might get expensive soon!
