Trump’s Tariffs Add to Turmoil of U.S. Manufacturers

Dan Digre, head of MISCO Speakers, was on edge before the coronavirus outbreak hit the global economy. Payment of hundreds of thousands of dollars in Chinese tariffs had wiped out the profit and dwindled the cash balance of the Minnesota-based loudspeaker maker, Reuters reports.

Now Digre is grappling with dropping sales and payment delays. With cash ever harder to come by, he must cough up the money for President Donald Trump’s 25% tariffs on parts that Digre imports from China for speakers used in everything from mass transit systems and gaming devices to essential ventilators and military equipment.

As a deepening economic recession dries up their revenue streams, hundreds of import-dependent large and small businesses are finding it tougher to survive the pandemic due to tariff costs, according to Reuters.

“You are caught in a double bind,” Digre said. “You need cash to operate your business. At the same time, you are not getting cash in.”

Despite a “Phase 1” deal, $370 billion of Chinese goods imported into the United States are still subjected to tariffs of up to 25%. Similarly, 25% tariffs on foreign steel and a 10% duty on aluminum imports remain in place – taxes on American businesses at a time of little revenue.

“Companies are paying taxes on goods that they can’t sell right now for the stay-at-home orders,” said Jonathan Gold, spokesman for Americans for Free Trade – a broad coalition of U.S. industry groups that lobby against the tariffs.

Since March 2018, Trump has been employing tariffs as part of a restrictive trade policy to rewrite terms that he says have destroyed American industry and jobs, Reuters adds.

Keeping tariffs in place on Chinese goods he says would maintain leverage over China for a Phase 2 trade deal. Further relaxing the metal tariffs could jeopardize domestic producers, according to some U.S. steelmakers.

San Diego-based athleisure maker Vivacity Sportswear has been paying a 25% tariff on one-third of its raw materials that are sourced from China, leading to a 15% drop in profit last year, CEO Vivian Sayward said.

For the past couple of months, the company’s revenue has dropped 80% and inventory has increased by 60%. Shrinking profit margins and depressed demand have compelled it to temporarily halt all manufacturing.

Lower demand has also prompted MISCO to stop all new shipments from China. That will reduce its tariff expenses – but the company has to find money to pay for the goods that are about to arrive or have reached the United States.

In a letter to the White House last month, executives of more than 350 American companies, including farm equipment maker CNH Industrial, retailers Macy’s Inc, Gap Inc and J.C. Penney Co Inc, urged Trump to delay the collection of duties by 90 to 180 days to help them preserve cash flow during the pandemic. However, the calls for blanket relief have failed to gain traction.

In March, the Office of the United States Trade Representative took some Chinese medical products off the tariff list. It has also asked companies to file requests for duty exemptions for supplies that can be effective in dealing with the coronavirus.

Earlier this month, the Trump administration allowed importers that have faced a “significant” financial hardship due to the virus to delay payment of tariffs for 90 days for goods imported in March and April. The relief, however, will not be available to importers of Chinese goods and steel and aluminum.

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