Tariffs and Trade: Understanding the Impact on Pricing and Supply Chains

Introduction

Tariffs, taxes levied on imported goods, are a long-standing tool in international trade, designed to influence the flow of goods between nations.

The primary purpose of a tariff is to make imported goods more expensive, thereby making domestically produced goods more competitive or to de-incentivize the purchase of goods from a specific source country.

Arguments for and Against Tariffs

Proponents of Tariffs Often Argue That They:

• Protect domestic jobs: Tariffs can shield domestic industries from foreign competition, potentially preserving jobs in those sectors.
• Promote national security: Tariffs can be used to protect industries deemed vital to national security, such as defense manufacturing.
• Generate government revenue: While not the primary purpose, tariffs do generate revenue for the government.
• Address unfair trade practices: Tariffs can be used as a tool to counter dumping, which is the practice of selling goods in a foreign market at below cost.

Opponents of Tariffs Argue That They:

• Increase consumer pricing
• Reduce economic efficiency
• Harm export industries
• Hinder innovation

Impact on Key Industries

There are many product categories that would affect the flow and pricing of goods that are essential for laundry, hospitality, and long-term care industries. Below is an infographic with a schedule of current tariff rates from 2019 and potential increased rates. It is important to know that these are not the product categories or the actual rates that may or may not be implemented.

How Tariffs Affect Pricing

As an example:

If the cost of a specific syringe is $1.00 and the duty rate is 50% then the new cost as of the date of implementation will be $1.50 into the United States.

When goods are produced abroad there is the cost of the item, in this case the needle, and the associated costs of transportation (ocean or air shipment), standard duty/clearing charges, and other costs.

Upon the implementation date of the tariff then the cost of the product will be increased by the scheduled tariff, percentage of the value.

The tariff will only be applied to new goods entering the United States and not previous inventory that is already within the United States.

Uncertainty Around Implementation

It is not known that the implementation of tariffs are eminent or this is a negotiating tool to achieve goals between two countries such as balance of trade, intellectual property, or some other interest.

Ammar Khan , CEO | Calderon Textiles