Generally, like many people, my eyes sort of glaze over when I hear TV news about golf tournaments, stock reports, and international trade relations. But lately, reports of the stock market losing well over 1,200 points in just two days, and the deteriorating state of international trade relations have caused my eyes to go very wide indeed.
We’ve been through stock sell-offs before, but the trade war we’re in with China, and the effects of escalating tariffs and counter-tariffs on U.S. businesses and consumers are more cause for concern. We’ve been told that the tariffs are necessary to force China to end its unfair trade policies-particularly the onerous policy that forces American tech companies to hand over valuable technology and intellectual property before they are allowed to do business with China.
It started in January with tariffs on washing machines, but things got serious in March when the U.S. imposed tariffs on imported aluminum (10 percent) and steel (25 percent). Many products in the sign, graphics and visual communications industry have components made from aluminum and steel. Composite aluminum and corrugated aluminum sheet stock makers, sign fabricators, channel letter and sign cabinet makers, as well as light-box suppliers will all likely see significant price hikes-if they haven’t already.
Then in July another round of tariffs, known as Section 301 tariffs, went into effect which included a 25 percent tariff on imported Chinese PVC, including scrim vinyl, a product commonly used by many, many sign shops. That list also includes LEDs and mounted piezoelectric crystals. LED companies in the US that source LED components from China are starting to feel the bite. And as you likely know, mounted piezoelectric crystals are a key element of printheads used in many commercial wide-format inkjet printers. It’s only a matter of time before the cost of printheads jumps as well.
In September a new 10 percent tariff went into effect on $200 billion worth of Chinese imports-a tariff that will rise to 25 percent in January 2019 if China doesn’t bend. This long list (some 6,000 products) is for finished consumer goods including motor vehicles, motor vehicle parts, medical equipment and thousands of smaller consumer products. Auto prices are sure to jump, and the Dollar Tree-which sells everything for $1 and gets most of its products from China-may soon have to change its name to Two-Dollar Tree.
The point is that artificially higher prices for goods through trade restrictions have ripple effects throughout the economy, including the sign and graphics industry. Still, China is feeling the pinch. Their economy has slowed markedly, and in October China slashed the amount of cash some of its banks are required to hold in reserve-thus injecting about $174 billion of cash into its economy to offset the negative impact U.S. tariffs.
I don’t know how this will end. It makes my head spin to think about it. But one thing has stayed remarkably constant for me during all of this. Golf tournaments still make my eyes glaze over.
Okay, back to work.