Tariffs

[Playa]

Exactly. There has already been over 5 trillion dollars committed by several big corporations (Apple, Microsoft, Ford, etc...) to build new manufacturing facilities immediately in the US, and that number is growing.

China will be the only country that tries to fight. And they will lose. This may lead to the downfall of the CCP, similar to the fall of the USSR under Reagan.

Man, I hope you are right, and I generally consider you to be one of the smartest guys “in the room”. What concerns me with these tariffs is that the world commerce environment is different from heavy tariffs in the past. These are not Chinese companies importing good to benefit from the US market. These are US companies that that contracted with a factory in China to produce a good. These difference is the US economy takes a 4:1 hit in revenue.

Bear with me here while I tell a story about a widget. USA Corp contracts Shenzhen Factory to build a Widget. It costs USA Corp $10 to produce and ship the Widget. USA Corp then wholesales the Widget to various retailers and distributors at a 30% margin, or a wholesale price of $14.35. The retailer/distributor then expects to “keystone” that item, which is to say they mark it up 100% with a 50% margin.

So a tariff is imposed on a widget and USA Corp reduces their order to Shenzhen Factory. China’s economy loses $10 in revenue. Meanwhile USA Corp, its distribution partners and retailers lose $43.05 in revenue per widget ($14.35 + 28.70).

And there is no US produced version of The Widget to satisfy consumer demand at a more competitive/non tariff price.

[Shane]

USA Corp builds a factory to make the widgets they need and charge whatever price they need to make their same margin. The market eventually adjusts to the new price. More Americans have a decent paying job in their factory. China loses.

OR....

USA Corp contracts with a supplier in Vietnam, who struck a trade deal with the US so they don't have tariffs. China loses the business. Vietnam gets the business. USA Corp keeps rocking.

Either way, the Chinese Communist Party is potentially going to go the way of the Soviet Union under Reagan. It's not all about trade and tariffs. It's also about potentially defeating the Chi-Coms without dropping bombs.

[Playa]

Most of you know I have been in the “Christmas light industry “ for almost 20 years, and though I’m not immediately involved in the industry presently, I keep close tabs and have dozens if not hundreds of contacts.

this is what one of the CEOs of one of the larger companies in this space posted today. This business is located here in Texas.

STOP LISTENING TO WHAT THE MEDIA AND ADMIN ARE SAYING, INSTEAD START LISTENING TO THOSE WHO ARE ACTUALLY PAYING THE TARRIFFS.

”I want to give some real perspective on how devastating the new tariffs are. We have a full container of C7 and C9 Christmas bulbs currently shipping from China. The value of the product is around six hundred thousand dollars.

Last year, the tariffs on this shipment would have cost us $18,000. With the latest increase, our projected tariff cost is now $624,000 for this single container. That is more than the value of the product itself.

These tariffs must be paid immediately when the shipment enters the United States. But the product will not sell through for at least seven months. So how is a midsize company supposed to come up with that kind of cash up front?

And this is just one container. We have over 100 additional containers scheduled to ship over the next ninety days.

The reality is that the average business cannot absorb this cost. And for those that can, how many customers will still be willing to buy once prices are forced to rise that sharply?

This is not just our story. It is happening across the country. Small businesses. Big box retailers. No company, no matter how large or profitable, has enough cash sitting in the bank to cover this level of immediate cost.”

[47]

USA Corp builds a factory to make the widgets they need and charge whatever price they need to make their same margin. The market eventually adjusts to the new price. More Americans have a decent paying job in their factory. China loses.

OR....

USA Corp contracts with a supplier in Vietnam, who struck a trade deal with the US so they don't have tariffs. China loses the business. Vietnam gets the business. USA Corp keeps rocking.

Either way, the Chinese Communist Party is potentially going to go the way of the Soviet Union under Reagan. It's not all about trade and tariffs. It's also about potentially defeating the Chi-Coms without dropping bombs.

I'm for that.

[Shane]

I'm for that.

Me too! I don't know if that will pan out or not. The Chi-Coms might cave before they crater so they can live to fight another day. But if they let their pride and arrogance get the best of them, it could take them down.

[Playa]

USA Corp builds a factory to make the widgets they need and charge whatever price they need to make their same margin. The market eventually adjusts to the new price. More Americans have a decent paying job in their factory. China loses.

OR....

USA Corp contracts with a supplier in Vietnam, who struck a trade deal with the US so they don't have tariffs. China loses the business. Vietnam gets the business. USA Corp keeps rocking.

Either way, the Chinese Communist Party is potentially going to go the way of the Soviet Union under Reagan. It's not all about trade and tariffs. It's also about potentially defeating the Chi-Coms without dropping bombs.

Yeah… I know that is the utopian solution. Can USA Corp withstand 4 years of down sales AND afford build a factory, before they close? Thats a corporate death gauntlet for sure.

back to my experience in the Christmas light industry. Mr Woodward explains the technology exists almost exclusively in China to make LEDs. My personal experience is that my company moved a factory to Cambodia the last round of tariffs. We went half the year without products because Cambodia (and Vietnam to some extent) does not have the infrastructure to support it. Our shipments sat for months because the only road to the port from our factory was a dirt road over a rain forest mountain range . Heavy trucks could not navigate during rainy season. Which, unironically is why most of the factories in China are located in northern provinces because the climate is more suitable than the hot humid and rainy southern provinces that share borders with Cambodia & Vietnam.

[Man]

Yeah… I know that is the utopian solution. Can USA Corp withstand 4 years of down sales AND afford build a factory, before they close? Thats a corporate death gauntlet for sure.

back to my experience in the Christmas light industry. Mr Woodward explains the technology exists almost exclusively in China to make LEDs. My personal experience is that my company moved a factory to Cambodia the last round of tariffs. We went half the year without products because Cambodia (and Vietnam to some extent) does not have the infrastructure to support it. Our shipments sat for months because the only road to the port from our factory was a dirt road over a rain forest mountain range . Heavy trucks could not navigate during rainy season. Which, unironically is why most of the factories in China are located in northern provinces because the climate is more suitable than the hot humid and rainy southern provinces that share borders with Cambodia & Vietnam.

I'm in the same boat. Ningbo is still the world supplier of lights. The only light manufacturers I have found outside of China only want to do higher end lighting and want nothing to do with "price conscious" lighting.

[Death from Above]

Is there any other country that buys Christmas lights?

what percentage of that market is the usa?

[donpablo]

Yeah… I know that is the utopian solution. Can USA Corp withstand 4 years of down sales AND afford build a factory, before they close? Thats a corporate death gauntlet for sure.

back to my experience in the Christmas light industry. Mr Woodward explains the technology exists almost exclusively in China to make LEDs. My personal experience is that my company moved a factory to Cambodia the last round of tariffs. We went half the year without products because Cambodia (and Vietnam to some extent) does not have the infrastructure to support it. Our shipments sat for months because the only road to the port from our factory was a dirt road over a rain forest mountain range . Heavy trucks could not navigate during rainy season. Which, unironically is why most of the factories in China are located in northern provinces because the climate is more suitable than the hot humid and rainy southern provinces that share borders with Cambodia & Vietnam.

I'm not saying these companies should/would do anything that's not legal... But this reminds me of the (based on a true story) movie War Dogs.

[Man]

Is there any other country that buys Christmas lights?

what percentage of that market is the usa?

Germany....if they still will allow it.

[Man]

Most of you know I have been in the “Christmas light industry “ for almost 20 years, and though I’m not immediately involved in the industry presently, I keep close tabs and have dozens if not hundreds of contacts.

this is what one of the CEOs of one of the larger companies in this space posted today. This business is located here in Texas.

STOP LISTENING TO WHAT THE MEDIA AND ADMIN ARE SAYING, INSTEAD START LISTENING TO THOSE WHO ARE ACTUALLY PAYING THE TARRIFFS.

”I want to give some real perspective on how devastating the new tariffs are. We have a full container of C7 and C9 Christmas bulbs currently shipping from China. The value of the product is around six hundred thousand dollars.

Last year, the tariffs on this shipment would have cost us $18,000. With the latest increase, our projected tariff cost is now $624,000 for this single container. That is more than the value of the product itself.

These tariffs must be paid immediately when the shipment enters the United States. But the product will not sell through for at least seven months. So how is a midsize company supposed to come up with that kind of cash up front?

And this is just one container. We have over 100 additional containers scheduled to ship over the next ninety days.

The reality is that the average business cannot absorb this cost. And for those that can, how many customers will still be willing to buy once prices are forced to rise that sharply?

This is not just our story. It is happening across the country. Small businesses. Big box retailers. No company, no matter how large or profitable, has enough cash sitting in the bank to cover this level of immediate cost.”

Thats tough and I can't imagine that this very scenario wasn't discussed heavily at the round table before it was decided to proceed. Maybe they have a relief package tucked away in the background?

[friscopaint]

Is there any other country that buys Christmas lights?

what percentage of that market is the usa?

I don't and evidently nobody else will either guess China will eat them.

[SaltwaterSlick]

Thats tough and I can't imagine that this very scenario wasn't discussed heavily at the round table before it was decided to proceed. Maybe they have a relief package tucked away in the background?

They talked about that very thing today in the news conference Trump held at his latest EO signing... That question was asked. He responded that of course some businesses because of their nature and markets have been and will be hurt more than others. We will take a look at those on a case by case basis. We do not want to hurt American companies... American companies that left the USA and set up shop in China because of their cheap labor like happened because of NAFTA, are a total different story. Those folks will just have to return to the USA...
(about the best paraphrase I can give of what was said from memory)

[friscopaint]

They talked about that very thing today in the news conference Trump held at his latest EO signing... That question was asked. He responded that of course some businesses because of their nature and markets have been and will be hurt more than others. We will take a look at those on a case by case basis. We do not want to hurt American companies... American companies that left the USA and set up shop in China because of their cheap labor like happened because of NAFTA, are a total different story. Those folks will just have to return to the USA...
(about the best paraphrase I can give of what was said from memory)

Ross Perot said it best on NAFTA, that's the sound of American jobs being sucked away......all those suffering by US tariffs on China, it's up to China to fix it and it's simple or products unaffordable to 40% of their export market.

[Playa]

Is there any other country that buys Christmas lights?

what percentage of that market is the usa?

Some European markets, Germany as mentioned, Austria, and a little in Norway, France and Italy. Central America would be the second largest market. I seriously considered moving to Costa Rica and selling to them, Mexico, Panama and the carribean islands.