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American Loudspeaker Manufacturing Faces Factory Closures and Exporting Jobs Unless President Trump Repeals Tariffs

By: Barry Vogel
 
Two months ago President Trump signed into law the CARES Act, the largest stimulus package in American history. The law recognizes the critical need to quickly inject cash into the U.S. economy in order to help workers and businesses survive the current crisis, and many companies are grateful for the help. But my industry and many others continue to struggle for one primary reason: the President’s trade war with China.
 
As Congress has worked quickly to limit the economic damage of the coronavirus pandemic, the loudspeaker industry that I represent continues to face a steep 25 percent tariff on their components that go into loudspeakers, which include the large speakers that fill concert halls with music as well as smaller speakers that entertain families at home.
 
But concert venues are now empty and large public gatherings are mostly canceled. Meanwhile, many of the stores that sell loudspeakers have had to close their doors for an extended period under stay-at-home orders. With their main sources of revenue gone over the past two months, the loudspeaker industry is in free fall. It hangs by a thread as sales come to a crawl, while overhead and tariff costs still loom large. Loudspeaker companies are struggling right now—but President Trump can help by making a deal with China to end the trade war and eliminate harmful tariffs.
 
Tariffs are taxes that Americans pay. And in the middle of the coronavirus crisis that economists say could lead to a prolonged recession, tariffs could very well drive loudspeaker companies towards the brink of bankruptcy if they aren’t rolled back soon. Tariffs squeeze budgets and have cost loudspeaker businesses millions of dollars in additional taxes. That money could have been better spent on hiring and growing our companies. In fact, before the trade war began, several loudspeaker companies had plans to expand manufacturing and hire more American workers. But because of tariffs, our industry is now being forced to focus instead on how to survive with thinner margins and larger operating costs.
 
Our industry has made direct appeals to the Trump Administration. The Office of the United States Trade Representative (USTR), which oversees the implementation of tariffs and trade policy, provides tariff exclusions to select companies that file requests. Many loudspeaker companies requested exclusions, but they were not granted. The current process lacks any transparency to understand why some companies and industries are receiving an exclusion while others, like mine, are not. Exacerbating the problem further, assembled loudspeakers imported from China are exempt from the tariffs giving them an even greater price advantage over American manufacturers.
 
Some large, politically connected corporations were able to have their requests granted, sometimes after meeting with government officials. But loudspeaker companies were denied exclusions without explanation, leaving them and other smaller industries to shoulder the burden of the trade war. The results are the opposite of what the Administration was trying to achieve: tariffs have actually helped shrink the number of manufacturing plants in America. Worse, the trade war weakens and disrupts critical supply chains amid the coronavirus pandemic, harming our country’s response to COVID-19. All in all, America is weaker while it is in a trade war.
 
Tariffs are causing many American manufacturers to close their doors and collapse, allowing China to consolidate global manufacturing while facing little competition from abroad. The handful of existing loudspeaker companies in America that are facing tariffs and a recession are on the verge of closing. These businesses are asking President Trump to make a deal with China and end the trade war.

Economists have said that nobody ever wins a trade war. Now is the time to end tariffs before it bankrupts companies and further harms the economy.

Tariff concern hits record high

Tariffs are continuing to burden Americans amid the coronavirus pandemic. 

As reported by Axios this week, a recent survey conducted by CivicScience shows that concern about President Trump’s trade war with China hit its highest level in April.

“The tariffs remain a massive tax on American businesses and individuals at a time when Congress and the Fed are expending trillions of dollars to offset the negative economic shock of the virus.”

This news comes as House Ways and Means Chairman Richard Neal called for a 90-day suspension of all tariffs on goods necessary to combat the COVID-19 public health crisis. Any deferral or suspension of tariffs is welcome and needed, especially as isopropyl alcohol, a critical ingredient in hand sanitizer and other disinfectants, is still subject to a 25 percent tariff.

“The tariff is making it more difficult for companies to supply our nation’s essential workers with antiseptics and sanitizing products they need to protect themselves and others from COVID-19,” Chris Jahn, president and CEO of the American Chemistry Council, tells Reason.

To make matters worse, China is nowhere near meeting their monthly purchase of U.S. goods, meaning that they are not holding up to their Phase One trade agreement. As Americans for Free Trade spokesperson Jonathan Gold pointed out earlier this week,

“Adding more tariffs during a time of economic crisis will only further punish U.S. companies, manufacturers, and farmers who are already struggling to survive.”

Rather than putting new tariffs in place, the President should be focused on removing the existing tariffs in order to help American businesses survive.

Americans for Free Trade Statement on President Trump’s Comments that New Tariffs Would be the “Ultimate Punishment” for China

WASHINGTON, D.C., (May 4, 2020) — Today, Americans for Free Trade spokesperson Jonathan Gold released the following statement in response to President Trump’s comments on Fox News Sunday night that adding new tariffs would be the “ultimate punishment” for China. 
 
“Tariffs are taxes paid to the federal government by American businesses, not China. Adding more tariffs during a time of economic crisis will only further punish U.S. companies, manufacturers, and farmers who are already struggling to survive. Rather than putting new tariffs in place, the President should be focused on removing the existing tariffs, which would instantly free up billions of dollars that businesses need now to stay open and preserve U.S. jobs.”

ICYMI: “Trump’s tariffs add to pandemic-induced turmoil of U.S. manufacturers”

A new story in Reuters details how President Trump’s tariffs are hurting hundreds of small and large American businesses that are fighting for survival during the coronavirus pandemic.

Tariffs are taxes that American businesses pay to the federal government. Companies that were struggling to pay the President’s tariffs before the health crisis hit explain why these tariff payments are even harder to make now:

“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. 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…” 

Many retailers are being forced to continue making tariff payments even though government mandates are keeping their doors closed:

As AFT spokesman Jonathan Gold said, “Companies are paying taxes on goods that they can’t sell right now for the stay-at-home orders.”

The unprecedented economic challenges created by the coronavirus outbreak and the President’s tariffs are forcing some businesses to temporarily cease operations or consider closing.  

“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. In the past two 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.”

The data is clear: the Trump Administration could free up billions of dollars for struggling U.S. companies by suspending or delaying tariffs. This much-needed cash could help revenue-starved businesses pay employees, suppliers, and other critical bills. Until then, American companies, workers, and consumers will continue to pay the price for President Trump’s trade war. 

Americans for Free Trade Urges President Trump to Delay All Duties American Companies Pay to Federal Government; Free Up Billions of Dollars in Cash for Businesses Fighting for Survival

WASHINGTON, D.C., (April 28, 2020) — Today, Americans for Free Trade urged President Trump to take further action to provide relief to struggling American businesses by delaying the collection of all duties and fees. The coalition of over 470 businesses also called on the Administration to expand its current program so that duties from May and June are also deferred. 

“The Administration’s announcement last week to defer the collection of certain duties for 90 days was a good first step, but many companies were excluded from this measure and will still owe significant duties to the federal government during a time of economic crisis,” said Americans for Free Trade spokesperson Jonathan Gold. “As hundreds of small and large businesses face urgent liquidity issues, we are calling on President Trump to go further and delay all duty payments to help give companies the cash they need to stay open, preserve American jobs, and be in a position of strength when the economy reopens.” 

The Administration could expand the current Executive Order and defer collection of all duties without waiting on authorization from Congress. As it currently stands, the Administration is only deferring the collection of some duties and only for imports made in the months of March and April. Deferring all duties for imports made in March, April, May and June would instantly free up billions of dollars for companies, many of which currently have little to no revenue, to use to pay employees, suppliers, and other critical bills. 

The Americans for Free Trade letter was signed by over 470 businesses and organizations of all sizes, representing retailers, manufacturers and other service providers, as well as farmers and ranchers.  

The full text of the letter may be found here and below:
 

April 28, 2020

The President

The White House

1600 Pennsylvania Ave., NW

Washington, DC 20500

Dear President Trump,

Thank you for your ongoing leadership to address the unprecedented economic challenges created by the deadly COVID-19 pandemic. Your leadership has included measures that have helped many businesses delay payments like income and payroll taxes to increase liquidity. The announcement to delay certain duties was another welcome step to help American companies stabilize their finances and buy time.

While this program will certainly benefit some U.S. companies, it will not benefit many others because certain important duties have been excluded and because it only covers imports made during the first half of March and April. While we understand the need to keep strong U.S. trade policies front and center, merely delaying the payment of these additional duties will not harm trade policy. The duties will still be paid, just at a later date. 

It is with this in mind that we make two urgent recommendations. First, we ask that you extend the program to cover imports made during May and June. Second, we urge that the program be expanded to defer the due dates for all duties and fees.

Combined, these two actions would immediately free up billions of dollars of working capital for American companies — like those listed below — to pay suppliers, employees, service providers and other critical stakeholders. This cash is even more important for companies that have had to close their doors because of stay-at-home orders, leaving them with little to no revenue to make ends meet.

Companies facing urgent liquidity issues need their duty payments deferred in order to succeed when the economy reopens. Deferring these duties will help further ensure the success of your Great American Economic Revival effort by giving companies the additional cash they need to stay open, preserve U.S. jobs and reopen their doors from a position of strength.

With future Congressional action uncertain, the American economy depends on your leadership and swift action. Your leadership alone can provide immediate relief to companies large and small from all sectors of the economy including manufacturers, retailers and other service providers, farmers and ranchers.

Sincerely,

Americans for Free Trade Statement on Executive Order to Defer Some Duties for 90 Days for Businesses Impacted by Coronavirus Outbreak

WASHINGTON, D.C., (April 20, 2020) — Today, Americans for Free Trade spokesperson Jonathan Gold released the following statement regarding the Administration’s announcement to defer collection of certain duties for 90 days for businesses struggling during the coronavirus outbreak:

“The Administration’s announcement to defer the collection of some duties for 90 days is welcome news and a good first step to help provide temporary relief to American companies that are fighting for their survival during the coronavirus pandemic. Delaying the collection of certain duties will help free up cash for companies who desperately need it to stay afloat and preserve U.S. jobs.  While we thank President Trump for listening to the concerns of businesses and taking action to help them get through this crisis, many companies were left out of this measure and will still owe significant – and in some cases a crippling amount of – tariffs to the federal government at a time when they are struggling to survive an unprecedented economic shutdown. We urge the Administration to heed the call of hundreds of businesses and organizations to expand this Executive Order to all categories of tariffs, and delay collection of all duties for American companies.”

On March 18, 160 businesses and organizations, representing every part of the U.S. economy including manufacturers, farmers and agribusinesses, forest products, retailers, technology companies, service suppliers, natural gas and oil companies, importers, exporters, and other supply chain stakeholders, sent a letter calling on President Trump to suspend tariffs as part of the Administration’s emergency measures to help mitigate the economic crisis caused by the coronavirus outbreak.

COVID-19’s impact on tariffs and trade

The impact that COVID-19 is having on tariffs and trade continues to have severe consequences on the American economy.

Tariff worries have hit a record high amid the coronavirus outbreak.

“About seven in 10 people said they were at least somewhat concerned about tariffs in March, according to the latest survey from CivicScience provided first to Axios.” 

That’s the highest number reported since the company started tracking the data.

One of the most efficient actions that President Trump and Treasury Secretary Steven Mnuchin can take in order to help businesses survive is to defer tariff duties. PVH Corporation CEO Manny Chirico echoed this notion on CNBC’s “Squawk Box”:

“85% of our business is shut down and where the government could help is on the liquidity side.”

In CNN, Mary Lovely, professor of economics at Syracuse University and non-resident senior fellow at the Peterson Institute for International Economics, laid out several examples of why leaders in Washington should not overlook one simple and effective tool in combating COVID-19: suspending the remaining tariffs on Chinese imports.

“With Americans facing the unprecedented challenges of Covid-19 containment, and the deep recession that is expected to follow, it is time for President Trump to end a harmful policy that has outlived any usefulness.”

Former Wisconsin Governor Scott McCallum agrees. The governor wrote in Real Clear Politicsthat eliminating tariffs completely is a smart strategy for the Trump Administration to take in order to give American businesses and consumers relief during this pandemic:

“As President Trump considers plans to help the economy during this period, ending tariffs with a strong trade deal that holds China accountable should be on the table. In addition to other measures, it would provide immediate relief to many of those who are on the front lines of this health crisis.”

The time is now to end tariffs.

Americans for Free Trade Statement on United States Trade Deficit Dropping 12 Percent in February

WASHINGTON, D.C., (April 2, 2020) — Today, Americans for Free Trade spokesperson Jonathan Gold released the following statement after the United States trade deficit dropped 12 percent in the month of February.

“A 12 percent drop in the trade deficit is significant and very troubling for the U.S. economy. What’s worse is that the decrease happened in February, before the surge of COVID-19 cases hit the United States. As the COVID-19 pandemic continues to have a profound impact on the economy, it is more important than ever for the Administration to provide as much relief as possible to American businesses, manufacturers and farmers so they can keep their doors open and employees working. We urge President Trump to provide tariff relief for companies who desperately need the liquidity to remain operational. This is an executive action that the president can take to immediately help U.S. companies and their employees.

###

BACKGROUND

The U.S. trade deficit shrank in February to the smallest in more than three years as imports declined more than exports ahead of the hit to global commerce from the expanding pandemic. (Jeff Kearns, “U.S. Trade Deficit Narrowed to a Three-Year Low in February,” Bloomberg, 4/2/20)

Americans want tariffs removed

The trade war with China has cost American businesses, consumers, farmers, and manufacturers over $53 billion, according to data from Tariffs Hurt the Heartland. 

While President Trump has consistently claimed that China is paying for these tariffs, it’s simply not the case. And given the severity of the public health and economic crisis surrounding COVID-19, it is more important than ever that tariffs are lifted. But, as reported by the Wall Street Journal yesterday, the Trump Administration is brushing aside calls to put broad import tariffs on hold, despite pleas from the business community that it could help stimulate the increasingly rocky U.S. economy. 

Business owners have been calling for tariffs to be removed since the President’s trade war began because of the uncertainty and damage they cause. As Darryl Meattey, a small business owner in New Hampshire who voted for President Trump in 2016 wrote in the Concord Monitor“…tariffs are slowly driving us out of business.”

Angela Carr, a small business owner in Pennsylvania has also been hit hard by tariffs. In fact, she has paid $500,000 in additional taxes because of tariffs. She shared in PennLive,

“We were thriving before tariffs – and we wanted to use our success to promote our goods to new markets, grow distribution, develop new products, hire additional staff, and give current employees increased compensation and benefits . . . but now, because of the tariffs, our cash has been so significantly impacted, these things are no longer possible.”

The Boston Globe highlighted how in Massachusetts, Delta Cycle owner Jeff Greenstein is unable to grow his business and has been forced to raise prices of his products because of the trade war.

“…my employees and my customers have done nothing wrong. So why are we being punished when we have nothing to do with this fight?”

Echoing the notion of uncertainty by tariffs, Reuters highlighted several other business owners across multiple industries that have been affected by tariffs. One of the most notable examples came from MISCO President Dan Digre, an audio equipment maker with 100 employees who has paid hundreds of thousands of dollars in tariffs.

“It just seems wrong. We’re not creating anything new. We’re spending all this time and money trying to deal with a problem that’s more or less self-inflicted.” 

The agricultural industry is especially being hit hard from tariffs. Recently, Minnesota farmer Tim Dufault testified at a House Ways and Means Committee hearing stating:

“…while you would be hard pressed to find a farmer who would disagree with the fact that China has been a bad actor, farmers have shouldered the pain for a strategy that has seen only one minor tariff reduction and several tariff escalations.”

It’s critical that President Trump provides immediate financial relief to American businesses and workers during this period of uncertainty. After all, as seen in RedState.com, the trade war could unravel President Trump’s economic accomplishments and cost him reelection in November.

Americans for Free Trade Responds to President Trump’s Claim that Other Countries Are Behind Letter Asking to Suspend Tariffs

WASHINGTON D.C., (March 18, 2020) — Today, Americans for Free Trade spokesperson Jonathan Gold released the following statement in response to President Trump’s comments at the White House press conference today where he suggested that other countries were behind Americans for Free Trade’s call to suspend tariffs: 

“This letter calling for President Trump to suspend tariffs was not sent by China, it was sent by a coalition of 160 American business associations representing thousands of American businesses and millions of American workers. The letter shares the concerns of US manufacturers, retailers, farmers and agribusinesses who have been paying for tariffs since the President’s trade war began.”

The full text of the letter may be found here.