This has hit industry players like Raza Hashim, an important mover in the import industry, with a massive import tax bill. It exploded from about $2.5 million (£1.5 million) a year to more than $100 million a month, as of April 2023. All of that dramatic spike is due to the sharply-enforced tariffs that the United States imposed. These tariffs, most notably on Chinese imports, now average 30%. The deadline for the current 10% tariffs is coming up very soon. We enter a period of great ambiguity about what happens when they expire on July 9, 2023.
In response to these shifting economic conditions, Learning Resources, a leading educational toy manufacturer, is proactively reconfiguring its global supply chain. The company’s relocating its production from China to Vietnam and India. This change is meant to help alleviate the unintended financial burden imposed by tariffs. CEO Rick Woldenberg epitomizes this proactive approach, stating, “We just have to make the best decision we can, based on the information we have, and then see what happens.” He makes the case that we need to respond to quickly emerging changes instead of just “waiting things out.”
In May 2023, a US District Court judge ruled that the tariffs levied against Learning Resources were illegal. Just days after that decision, the US government immediately appealed to the 9th Circuit. As such, Woldenberg’s company is still experiencing the consequences of these tariffs financially at least for the foreseeable future. He highlighted the impact of these tariffs on consumer prices: “These tariffs will directly impact the end consumer [in the US].”
Indeed, the story is starting to get complicated as affected businesses try to hash out what these tariffs mean for them. Take something such as Cluck Clucks, a locally owned business that’s importing specialized catering fridges and pressure fryers from the United States – they’re facing the same challenges. Our case in point today, Oro Del Desierto, an olive oil producer, currently exports only 8% of their production to the US. They need to understand the bigger picture of these tariff policies.
The impacts are deeper than just reshoring or moving supply chains, but require brands to rethink how and where they source on a structural level. As industry veteran Les Brand explained, major research would be needed just to find new suppliers for key inputs. He remarked, “Trying to find new sources for critical components of whatever you are doing – that’s a lot of research.” This process can be exhausting and sometimes takes money and mindshare away from more important business priorities.
Woldenberg continued to address the types of struggles encountered in making this shift. “We have gone through the process of vetting the new factories, training them on what we needed, making sure that things could flow easily, and developing relationships,” he explained. He stressed that there remain uncertainties regarding whether these new factories can handle sufficient capacity: “We don’t know if they can handle the capacity of our business. Let alone the rest of the planet venturing in there all at once.”
Tariffs affect international trade dynamics. In a tit for tat move against US policies, Canada has enacted 25% reciprocal tariffs on hundreds of American exports. Complicating the picture, the US has slapped broad 10% tariffs on a broad variety of European imports—far higher than those recently imposed against China. This disparity sheds light on the difficulties of managing trade relations during a time of increased tariff conflicts.
Other industry figures have been critical of the pace and suddenness of tariff rollouts. Brand voiced concerns over the rapid changes: “The speed and velocity of these decisions are really making everything worse. President Trump needed to be less rushed and more substantive with regard to these tariffs. Most business leaders are caught flat-footed just trying to react to the unprecedented level of shifting conditions.
For all these challenges, Hashim looks favorably upon his company’s strategic pivot. “This was a substantial decision for us, but we believe it’s the right strategic move,” he stated as he looks towards future opportunities in new markets.