Special Edition May 2019

.PROMO

May 2019

Special Edition The Business Impact of the Trump Tariffs on Promotional Products Buyers

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Special Edition

The Effect on the Promotional Products Industry For Buyers

The Business Impact of Trump’s Tariffs on Promo Products

14 The Impact on Our Nation What Promo Products Trump’s Tariffs Affect The Complete List...

29 Why Promo Products are Purchased Overseas .promo

The

Business Impact of

Trump’s Tariffs

on the

No matter where you turn, every newspaper, TV or cable show is talking about the impact of Trump’s Tariff War against China.

We all know the tariffs are effecting just about every product, from the price of cars to the price of soybeans. In addition, the tariffs also affects many business segments of the USA who are exporting to China. But they are also affecting the promotional products industry as well and we thought you’d like to learn what we’ve heard.

Let’s say this first. The tariffs will cause prices on almost every imported product to increase, but NOT as much as you’d think. Many sources say by 25% but we don’t think it will be that high.

The reason we think that is based on how to calculate the 25% increase. Here’s what we know.

Tariffs are based on “first costs” when made in China. They are not charged like the final retail price sales tax is, on the final sale.

First costs are what the China factory charges the importer. For example, a logoed stick umbrella might have a first cost of $4.75.

That’s what the tariffs will be levied on.

Yes, the first cost price will go up 25%, but NOT the final price you’d pay after shipping from China, which includes additional duties (stick umbrellas carry an additional 8.27% duty) as well as freight forwarder handling fees and more.

Let’s make another comparison. Let’s say GE wants to import a toaster oven from China that has a $50 retail price in the USA. GE agrees to pay $7 for the toaster oven before it leaves China’s port.

The duty will be $1.74 based on Trump’s 25% Tariff which totals $8.75 and not 25% on the $50 retail price. Yes...you will find companies adjusting their prices quite a bit, but the real increase to you in the final analysis will be in the 4%-6% hike instead of 25%.

There are now $500 Billion in Taris...virtually ALL imported goods are now or will be subject to the 25% taris; including most Chinese-made promotional products.

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How Will the Tariffs Affect the Promotional Products Industry?

WIth almost every product affected--from key rings to phone covers--you’ll probably have to ask us to requote your projects a few times. This is especially true when requesting quotes weeks in advance. This will continue until the dust settles.

Even with these increases our products will continue to do their advertising job getting many more impressions than other advertising venues.

Options?

There are many!

We have access to over 750,000 products and within every product category there are USA-made, Vietnam, Indian, Mexico and other countries that make promotional products. It’s interesting to note that every country in the world uses promotional products.

But even with this ability to get you products from anywhere in the world, we believe that China’s prices will stay fairly competitive.

Deliveries will not be impacted at all. You can depend on the same reliable delivery you’ve had up until this point.

We do not expect this crisis to go away anytime soon. China has stolen a lot of our industrial secrets and that’s a major sticking point--pirated branded goods of all types--in the negotiations. Some economic experts are saying that the tariffs are here to stay. Why? Tariffs are collected by the US Government which can help offset the deficit.

Since the deficit is at an all time high, this is one way to fill the Fed’s bank.

The Business Impact of Trump’s Tariffs on the Promotional Products Industry

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THE CHALLENGE & WHO GETS HURT

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The Promotional Products Industry is home to and employs over 100,000 people. Our industry is big: $20 billion a year is spent by about 300,000 Buyers--like you--who order logoed products.

Many of our industry sources say this is not a disasterous time for buying promotional products. While an alarm has been raised, companies in the USA will continue to spend billions & billions for logoed products. Not included in that total are products sold by Nike, Louie Vitton, etc.

Their brands--along with some promotional products--are widely pirated.

So here’s where we are involved in this fight. Since we are in the business of logoing products we have to be sensitive to the broader makeup of it and how it affects America.

Some retail brands are being cheated big time with blantant forgeries of their logos on fake products. This also happens with promotional products, like SuperBowl shirts.

So suffice to say that presents a good enough argument there’s reason we are ALL in this fight.

Logoed merchandise is heavily pirated.

The Department of Homeland Security (DHS) reported over 34,000 import seizures for 2017. Based on suggested retail price the total financial impact was a whopping $1.3 trillion or $3.8 million intellectual property rights violations per day.

Mainly that was from China so American companies are getting cheated out of boatloads of money.

This is one of Trump’s sticking points with China; getting the Chinese to crack down on these fake factories.

However, its pretty sure to say that this will never be fixed no matter how good the fixer is. China will always pirate our products and technologies; we just have to guard them better.

Just like Nike and Louis Vitton use their logo to advertise and make money on their brand, Promotional Products have become a mainstay in American advertising which constantly impacts our Nation’s sales.

WHAT’S THE BOTTOM LINE?

The impact on Promotional Products is, thank goodness, not a significant one monetarily.

Raising tariffs past 25% will not be something Trump will want to do.

The facts: Promo products are just one of the casualties involved in trade wars. Everyone and every company has been affected.

Overall, while prices will go up a tick or two, it will not drastically hurt promo ad campaign spending because of how the tariffs are calculated. Remember this: Tariffs are derived from the “First Cost” of the goods you buy, not the invoiced price. As such that translates to a relatively small price increase in your promo purchasing.

The Trump administration's list of Chinese imports it wants to tariff includes almost all products exported from China to the USA. Interestingly, we, as Americans, are going to pay for this...not the Chinese.

Final thought, obviously there are opportunities to “Buy American”...and more will surface.

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What Prom TRUMP’S CHI Affe

mo Products INA TARIFFS ect Next Page

TRUMP’S CHINA TARIFFS The Office of the US Trade Representative (pictured right) recently released nearly 5,000 new items to be hit with the new tariffs.

Trump announced on May 17th, 2019 the latest volley.

Multiple products and product categories in the latest release were related to the Promotional Products Industry. For those of you that didn’t know, there was a original round of tariffs (in August 2018) that hit and it included many kinds of promotional items imported from China. Now most all categories are included.

Apparel, footwear or garment manufacturing had the biggest exposure. Here’s some of the items: Umbrellas Gloves & Mittens Glassware Products Socks Safey Headwear Headbands Decorating Machinery Golf Balls Ties Christmas Ornaments Ballpoint Pens, Pencils & Crayons

View the ENTIRE LIST HERE:

A Quick Overview Industry The Promotional Products Industry started in the early 1800’s but it didn’t formally organized until 1940. That’s when the industry became an advertising force for all sorts of companies to support their advertising needs. From there the use of promotional products gradually grew to be one of the greatest “impression producers” in the world. Who knew that seeing a company’s brand on a product would be as valuable as the products the companies sold? Branding--as we all know--is everything.

When the industry started many of the promotional products in use today were made domestically. About 90% were Made in the Good Old USA. The oldest promo manufacturer with roots to our industry still in business goes back to making label pins from 1924 to present.

In the early 1970’s it was more the norm than the exception for the promotional products industry to import goods from China. Everybody along the supply chain, especially Promo Product Buyers, were happy. The quality was good and delivery reliable.

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The change to using imported promotional products started in the late 1960’s when communications attained global status and the Far East wasn’t so far anymore.

But the biggest reason we went to China was because Promotional Products Buyers were pushing for lower prices and domestic producers just couldn’t be as competitive. Many USA companies went out of business but many more are still here today.

Today products you buy from us, your Promotional Products Distributor, come from all over the world. And that includes the good old USA. We still have a thriving domestic products pool to draw from and now the pricing for overseas goods might just be a little closer to American made.

We’ll keep you up-to-date. Stay tuned for another issue of IdentiyEdge.Promo.

Two years ago IdentityEdge.Promo started letting Buyers know about the Tariffs.

We’ve published at least six articles about Tariffs in recent monthly issues.

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