A tax on boots
The topic of economic tariffs is one that is being discussed at various manufacturing companies, at engineering firms, and by many contractors. Some building owners, well aware that prices may change in 2019, are hedging their bets and buying goods before the end of the year.
In a recent discussion with an editorial advisory board member, we talked about how her firm had prepurchased steel for the next 2 years. They have several large-scale projects in progress and know that they’ll need the steel, so it wasn’t a “guess” as to whether the product would be needed. Another board member thought that the tariffs might cause a recession and construction projects would slow down for him and his firm.
A couple of manufacturers we’ve spoken to have plans on hold because they’re concerned about the uncertainty of tariffs. They don’t know what their raw material costs will be, so they’re scaling back and redistributing their funding.
In July, the Associated General Contractors of America released a report about the surge in pricing in the construction industry, focusing on building and road-construction materials. The gist of the report is that profit margins are shrinking.
The looming question: Is this truly a market scare, or is it an “excuse” companies are making to increase prices, or slash human resources, or alter research and development plans?
Columbia Sportswear, highlighted in a New York Times article, is a global company that sells boots, coats, and a variety of outdoor gear. Its take on the whole tariff challenge? Keep doing what it’s been doing. A multinational firm with manufacturing around the world, Columbia is skirting tariffs just as it has for the past several years. According to the article, every piece it manufactures is made abroad, and it’s up to a team of designers and economic experts to figure out how to work around tariffs and continue to make its products a little less expensively.
That’s not to say that the cost of new hiking boots won’t go up. Materials may have to be sourced via a new supplier. Manufacturing prices might inch up because Columbia is using a higher-paid workforce in a different, and tariff-free, country. And good hiking boots just aren’t cheap. But companies like Columbia know how to work around tariff challenges, and have done so successfully.
The U.S. stock market has bounced up and down over the past several years, and an uptick in late November was due, in part, to rising oil prices and a strong retail weekend online.
The uncertainty still lingers, however, and it may for several months. For those of you with knowledge of economic practices at your company, please drop me a note and let me know whether or how tariffs are changing your business practices.