I don't think people really understand what is at stake. Trump says China is paying these tariffs but they are not. I am. U.S. companies are paying it at the port.
Friday, May 10th, 2019, the additional 10% tariff imposed on certain categories of Chinese goods in September 2018 was raised to a 25% tariff.
A tariff is a port tax due at the time of merchandise delivery and paid to the US Government.
If you Import Products into the US from China, Here Is Why It Is Critical For You To Gather Your Team and Take Swift Action To Prepare:
1) It Is An Immediate Hit To Your Margin
Your margin is your profit, and that and your customers should be on the top of your mind at all times. An additional 15% tariff increase (total of 25%) on your products is pretty catastrophic. You need to either price up your products that are affected, or find a way to absorb that cost by bringing in margin from other sources. Which means that you need to find a way to cut expenses to help mitigate the margin loss, or hopefully, you have some margin padding built into your products so this won’t hit you as hard.
You must be strategic in how you incorporate this change into your operations. For instance, instead of raising your prices for those specific products by 25%, consider taking an overall price increase for your entire product line to spread out the increase so it doesn’t hit your customers as hard.
You also need to be strategic about how this will impact your sales go forward. Raising prices means driving more Top Line Sales Dollars (Revenue) but also typically means Lower Top Line Sales Units. You may also need to adjust your buying strategy for these items since it impacts your open to buy, or how much dollars you have to spend on merchandise each month or buying cycle.
2) Your Customers Are Impacted Too
Lower margin for you yes, but this also means a higher purchase price for them. Depending on your business model, you might have to actually call it out to them and let them know that due to the tariff increase, you have to unfortunately also increase your prices.
Communication is key in ensuring that you are still satisfying your customers through this change. Draft an email communication to your customers and to your internal team to make them aware of the change, how it impacts them, and why you’re still just as dedicated to providing the best products and customer service through this change.
3) It Will Impact Products On Their Way To You Effective Today
When you place orders for products today go forward and put them on the water headed to your warehouses here in the States, all goods received at the ports will have the increased tariff.
Important Note: The President’s negotiations with China could result in the tariff decreasing in the near future.
For example, if they reached an agreement next week, he could decide to reduce the tariff amount. So it will be up to you and your team to decide the timing on when you want to take action. Best practice is to communicate with your internal team and customers that a price increase will need to go into effect in the coming weeks due to the tariff, but that you will closely monitor the negotiations with China.