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.