China Tariffs already kicking in

Sep 2012
3,826
3,732
California
#1
I sell networking equipment to carriers, ISPs and utilities. This week as I met with clients the issue of tariffs on Chinese goods came up for the very first time. One client has been buying a connector used to terminate fiber drops from China. These products are about one dollar each and they go through a lot of them. Last week one of their shipments came from China. DHL called our customer up to say they owed duties of 900 dollars on the shipment due to the increased 25% tariff Trump imposed. This single event triggered our customer to ask us and our suppliers which products will be subjected to tariffs and price increases. So far our suppliers do not have any idea how these tariffs will affect them. Price increases are likely as the 25% tariff kicks in on components, assemblies, raw materials and electronics. For instance, Juniper Networks makes their products in China as do most of the major networking vendors. These products already cost a lot, one router alone fully populated can cost 500 grand. If you slap a 25% tariff on that import we are talking about serious change. The payment to DHL did not go to DHL, it went to customs or the government. That extra cost was paid for by a US company employing 300 people supplying broadband to under served communities. The margins on this service are slim. If you increase the cost of building a network by 25%, it will have to be passed on to the consumer which means your old bill of 50 dollars will end up being 60 or 70 dollars without any increase in service or performance.

We have been asked whether or not outstanding quotes will be valid. We will end up having to charge more and pushing our customers to sources not affected by tariffs. In the networking space, equipment is assembled and tested abroad either in China, Mexico or similar low cost manufacturing countries. Trump is forcing suppliers to move their facilities around the world as he hurls tariffs in a willy nilly fashion or absorb the costs and hope the market will bear such an increase.

What exactly is the benefit of this policy? Does Trump think that any manufacturer will suddenly move their operations to Kansas when we all know these tariffs are not part of any treaty and can be changed with the stroke of a pen once Trump is out of office? This is what happens when you have knee jerk reactions to complex subjects and act unilaterally without consulting experts. This is only going to get worse as these tariffs start hitting everything that comes out of China. Just wait until this happens to goods from Mexico and Canada.
 
Jan 2018
827
832
The greatest place in America, California
#2
Steel and aluminum have seen some good price increases and scrap metal has lost value cause china can't buy it.
 
Apr 2015
13,970
2,473
Katmandu
#3
I sell networking equipment to carriers, ISPs and utilities. This week as I met with clients the issue of tariffs on Chinese goods came up for the very first time. One client has been buying a connector used to terminate fiber drops from China. These products are about one dollar each and they go through a lot of them. Last week one of their shipments came from China. DHL called our customer up to say they owed duties of 900 dollars on the shipment due to the increased 25% tariff Trump imposed. This single event triggered our customer to ask us and our suppliers which products will be subjected to tariffs and price increases. So far our suppliers do not have any idea how these tariffs will affect them. Price increases are likely as the 25% tariff kicks in on components, assemblies, raw materials and electronics. For instance, Juniper Networks makes their products in China as do most of the major networking vendors. These products already cost a lot, one router alone fully populated can cost 500 grand. If you slap a 25% tariff on that import we are talking about serious change. The payment to DHL did not go to DHL, it went to customs or the government. That extra cost was paid for by a US company employing 300 people supplying broadband to under served communities. The margins on this service are slim. If you increase the cost of building a network by 25%, it will have to be passed on to the consumer which means your old bill of 50 dollars will end up being 60 or 70 dollars without any increase in service or performance.

We have been asked whether or not outstanding quotes will be valid. We will end up having to charge more and pushing our customers to sources not affected by tariffs. In the networking space, equipment is assembled and tested abroad either in China, Mexico or similar low cost manufacturing countries. Trump is forcing suppliers to move their facilities around the world as he hurls tariffs in a willy nilly fashion or absorb the costs and hope the market will bear such an increase.

What exactly is the benefit of this policy? Does Trump think that any manufacturer will suddenly move their operations to Kansas when we all know these tariffs are not part of any treaty and can be changed with the stroke of a pen once Trump is out of office? This is what happens when you have knee jerk reactions to complex subjects and act unilaterally without consulting experts. This is only going to get worse as these tariffs start hitting everything that comes out of China. Just wait until this happens to goods from Mexico and Canada.
Perhaps you should look at finding domestic suppliers, or maybe there is opportunity for you as a domestic supplier.

How much product do you sell into the Chinese market? None, because of Chinese market barriers.
 
Likes: publius3
Jun 2014
46,594
46,336
United States
#7
What happened to the buy American keep Americans working strategy from the democrats in the 1990s and 2000s? It seems only midwestern democrats still believe this way. The rest of the party abandoned them. What happens if Sen Brown, Warren, Sanders or Stabenow run for president? They agree with Chinese tariffs.

Brown, Renacci support Chinese tariffs; campaigns still fight
Elizabeth Warren likes tariffs, too

Stabenow doesn't support the Trump tariffs: Stabenow Warns About Tariff Effects

As for the rest of them, they wouldn't likely win a primary, and if they did, it wouldn't be with my vote.

There certainly are rust belt Democrats who pander to economically illiterate constituents, but they'd need to get a new attitude in order to successfully run a national campaign.
 
Likes: BigLeRoy
Sep 2012
3,826
3,732
California
#9
Perhaps you should look at finding domestic suppliers, or maybe there is opportunity for you as a domestic supplier.

How much product do you sell into the Chinese market? None, because of Chinese market barriers.
I work as a VAR and distributor of over 400 product lines. We are a 50 year old privately held business. What I wrote may affect the entire networking industry. So far, we have not seen tariffs on routers or switches or access equipment. But if they can put a tariff on connectors, they can do it on larger items.
 
Sep 2012
3,826
3,732
California
#10
Go figure..

The Dow Jones Industrial Average hit its first record high since January on Thursday as gains in Apple and a decrease in trade fears lifted the 30-stock index. Boeing and Caterpillar, two bellwethers for trade, rose 1.1 percent and 2.3 percent, respectively.

Dow hits record, surpassing January level, as Apple rises and trade-war fears simmer down
We are constantly evaluating this situation and if we hear that these imports of American technology made in China are subject to the tariff, I will let you know. The markets may be in denial at this point since it is unclear if any of our partners know if they are subject to the tariff. I will be at Juniper all day today, the question will come up.