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Tariffs Impact Promotional Product Industry

The trade war between the United States and China has escalated again, as the US raised tariffs from 10% to 25% on $200 billion worth of Chinese imports on Friday, May 10.  China retaliated on Monday, 5/13 by vowing to raise tariffs to as high as 25% on roughly $60 billion worth of U.S. goods that are currently taxed at 5-10%.

As stated in an ASI article last fall, "as the trade war intensifies, the promotional products sector is caught in the maelstrom. That shouldn’t come as a surprise – the promo industry’s main supply chain model has long been rooted in Chinese factories producing a majority of the products suppliers and distributors imprint and sell in the U.S. The model has been successful, enabling the American promo market to benefit from reliable production while keeping product costs down. But now, the Trump tariffs are disrupting the status quo – and in no more profound a way than being the primary catalyst for sweeping price increases soon to take effect on promotional products imported from China that are subject to import penalties. “Suppliers simply have no choice but to increase prices on impacted products,” says Eddie Blau, CEO of Top 40 supplier Innovation Line."

Tariffs on logod products

Industry leaders at the 2018 ASI Power Summit were asked to describe the impact of tariffs in one or two words. This wordcloud shows their answers. The larger the word, the more people gave that answer.

Additional coverage in an ASI article posted this month included the following statements: 

  • "The ramifications of this sudden tariff hike are potentially devastating for the promotional products industry, which imports the vast majority of items sold stateside from China. “An additional tariff increase and expansion of the impacted item list will affect all products, not just promotional items, so consumers purchasing similar products like bags, etc. will most likely see these changes even at the retail level,” says Carrie Lewis, marketing/communication manager at Top 40 supplier Bic Graphic."
  • Several industry leaders weighed in earlier this week on how the tariff hike would impact business. “While a number of suppliers were able to absorb the initial tariff increase, I highly doubt any of them will be able to absorb these costs without passing much of it on to the distributor,” said Larry Cohen, president of Top 40 distributor Axis Promotions.
  • A few industry leaders had hoped that the threat to raise tariffs was simply a negotiating tactic. Now that it has become reality, contingency plans have to be made. “It’s obviously a severe setback for the promotional products industry, creating an intense amount of chaos and uncertainty,” said Eddie Blau, CEO of Top 40 supplier Innovation Line.
  • Suppliers have already had to adjust their annual catalogs due to the tariffs. Some have printed pricing with disclaimers like “High Tariff Risk Product - Check our website for the most current pricing.” Others have eliminated pricing all together, presented branding lookbooks instead. “This will be the first step in moving away from the annual pricing commitment and toward a variable pricing model,” says Howard Cubberly, general manager at Goldstar, the supplier arm of National Pen.

Minimize the Tariff Impact on Your Marketing Budget

We encourage our clients to challenge distributors who may be saying ‘most tariffs are too large for us to absorb, so we’ll have to pass on the cost increases to our customers.’ To minimize or eliminate the impact of tariffs on the promotional products you plan to purchase, you should talk to your provider about 3 key options:

  1. Promotional products that are made in the United States - click here for ideas!
  2. Products sourced from other countries that are not impacted by increased tariffs.
  3. Non-tariffed product categories.

Contact us today to start minimizing the impact on your marketing budget.