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Sunday, May 28, 2023

Tariff Impacts

For Louroe Electronics, the tariffs imposed by the Trump Administration on goods coming from China and other foreign countries have caused a rise in prices, but the overall impact on business has been minimal so far. Richard Brent, chief executive at the Van Nuys manufacturer of audio monitoring and security equipment, told the Business Journal the company has incurred $65,000 to $75,000 in increased costs on the resistors, transistors and other electrical parts it buys from China due to the tariffs. “We still buy those components in China,” Brent said. “There is no one here in the U.S. who makes them.” President Donald Trump has looked to tariffs as a way to push his “America First” agenda and lower the trade deficit. He made tariffs – essentially a tax on imports or exports – a central theme in his 2016 presidential run. “The tariffs are not helping us, but it sounds awfully good: ‘Hey, we are big and strong, and we are going to beat them (China) up,’” Brent said. While the cost increases may not be a lot for Louroe, they still get passed on to the company’s customers. Eighteen months ago when it sent out a pricing letter to its customers, Louroe called out the Trump administration as the reason behind a 1.5 percent increase in prices beyond the 3 percent it was imposing to handle health care and the cost of doing business in California, Brent said. Louroe sells directly to end-users, such as police departments, hospitals and schools; security systems integrators; and to the alarm industry. Its equipment only monitors people’s voices and does not record them. A resistor that had cost a half cent now comes with a price tag of three quarters of a cent. While that may not sound like much, it adds up when one takes into consideration all the resistors that Louroe uses on its circuit boards. “Multiply it out and it has a significant impact,” Brent added. Domestic sourcing Moore Industries International, a Valley manufacturer of instruments for industrial process automation and control, is in much the same boat as Louroe. Tom Watson, marketing manager for the North Hills company, said that price increases due to the tariff on electronic components it buys from China is a fraction of a cent per unit. “In the number that we order, while they are sizeable numbers, the cost is so low that it’s a minuscule increase in cost,” Watson said. Another way that Moore could be impacted is by customers deciding to buy less from the company than they otherwise would. But so far, Watson said there has been no word passed along by its manufacturing representatives who deal directly with customers of any dissatisfaction. “No one has complained to us or commented to us,” Watson said. Trump’s tariffs started just days after being sworn in as president in January 2017 with a 30 percent tax on solar panels produced outside the U.S. That amount will decrease to 15 percent by 2021. Next followed a tariff of 20 percent on finished washing machines after a petition was filed by Whirlpool Corp. that it faces tough competition from South Korean appliance manufacturers. In March of last year came a 25 percent tariff on steel and a 10 percent one on aluminum from China, Canada, Mexico, Australia, Brazil, South Korea and the European Union. Later, exemptions would be granted to Australia, Brazil, Argentina and South Korea from the tariff and the same would be granted to Canada and Mexico in May of this year. Tom Manzo, president of Timely Industries, a Pacoima manufacturer of pre-finished steel door frames, said that the company has not been affected by the tariffs because it buys much of its steel from U.S. sources. Timely has had a long-term relationship with USS POSCO, a joint venture between U.S. Steel and POSCO in South Korea. “We are fortunate we hedged our bets on domestic steel to begin with,” Manzo said. Trade war fallout? The Trump tariffs have sparked a trade war with China. As the U.S. imposed new taxes on imported goods, China retaliated with tariffs of its own. On Sept. 1, for example, a 15 percent tariff on $112 billion in Chinese imports went into effect, as well as a 5 percent to 10 percent increase on U.S. goods sent to the Asian country. The Chinese goods being taxed include consumer items, including some clothes, shoes and sporting goods. Brent said that the insidious part of the tariffs is that the U.S. consumer is the one likely paying the increased cost. “He (Trump) thinks he’s slapping China,” Brent added. “But China says, ‘No, I’ll just pass it right back’ and the consumer is going to pay.” Jake Parker, senior director of government relations for the Security Industry Association, a trade group based in Silver Spring, Md., said that one of the biggest issues faced by its members companies is the uncertainty of the future of the tariffs. If a company is looking to switch its supply source to a non-Chinese company, there is a lengthy process that requires long-term planning. Parker said. “Without knowing when the tariffs might come to an end or when a (trade) deal will be reached or how long they can expect them to be in place, it makes it difficult to plan,” he added. Brent, who serves on the executive committee of the association, estimated that at least half the companies in the security industry face increased costs because of the uncertainty caused by the tariffs. How much of a percentage it went up and how it is affecting their business models, however, he conceded that he did not know. Part of the uncertainty is Trump backing down on placing increased taxes on goods coming from China, including cellphones, laptop computers, video game consoles, certain toys, computer monitors and certain items of footwear and clothing, from September until December 15. “We’re doing this for Christmas season, just in case some of the tariffs would have an impact on U.S. customers. So far they’ve had virtually none,” Trump was quoted in August as explanation for the delay. Brent was having none of that. “What I think happened is that enough businesses got to him and said, ‘If you push this tariff there will be no Christmas toys coming in because they are made in China,’” he said. “You want to be the one to tell that Santa couldn’t deliver (toys)?”

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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