Tag Archives: Textile business

Tariffs and the Cost of Quilting

Have you paid any attention to the new tariffs imposed on goods imported to the US? I’ll tell the truth: there is so much chaos in the political news all the time, I haven’t keyed in on this as much as I should. However, yesterday I saw two articles on the tariffs and the cost of quilting. The issue in total is worth understanding better, and if this is our entry into that understanding, so be it.

The first item to clear up is the term “tariff.” A tariff is a tax or duty paid on a class of imported goods. (Alternately, it could be imposed on goods being exported, to be paid before they leave the country.) The importer pays the tariff. If the importer re-sells that good directly, they will need to increase the price at which they sell, in order to recoup the expense of the tariff. If they don’t increase the price, their profit will be reduced or wiped out. If the importer is a manufacturer, they may be able to cut costs elsewhere to reduce the impact of the tariff. However, that will have a different effect, perhaps on the other suppliers they buy from, or on labor, or on the end buyer of their goods.

In July, the Trump administration announced that new tariffs would be imposed on the import of $34 billion of Chinese goods coming into the US. The intention was to make Chinese goods more expensive for American consumers, so we would import less Chinese product as compared to the amount of US product we export to China. In addition, American businesses would theoretically be “protected” from foreign competition, allowing them to increase their sales.

A trade deficit is the amount by which a country’s imports exceed its exports. According to the US Census Bureau, at the end of June, the US had a trade deficit with China of $185.7 billion for the year to date. In other words, we imported $185.7 billion more from China than we exported to China so far in 2018. In 2017, it was more than $375 billion for the year as a whole.

So far, that sounds reasonable, right? If we want a different balance of trade, we should (preferably) export more, and possibly import less. Tariffs would be a good way to import less. (There are a lot of economic reasons this may or may not make sense at all. Way beyond the scope of this little post.)

The hitch in this plan comes in with retaliation and escalation. As soon as the tariffs were announced, China declared their own set of tariffs on incoming American goods. And in return, trump has set in motion more tariffs against China, as well as new ones against Canada, Mexico, the European Union, and Japan. A wide range of goods from all over the world will be more expensive for Americans.

So how does this all affect the quilting industry? After August 30, another $200 billion of Chinese goods will be subject to tariffs that could be from 10-25% of value. In 2017, the US imported $6 billion worth of fabric of all types. Not all of that was from China, but from what I can gather (a variety of somewhat confusing sources,) about 30% of woven cottons are from China.

It is reasonable to assume that the prices we pay for fabric will go up, on average. Fabric companies will have to cover the tariffs as they import, and that cost will need to be covered by the consumer to maintain their profits. Small retailers (local quilt stores) may not be able to pass on the price increases to their own customers, which could lead to more shops leaving business.

In addition, textile machinery, including sewing machines not made in America, may have increased prices. (Which “domestic” or regular sewing machines are actually made in America these days? Any?) Tariffs on goods coming from the European Union and Japan might hit that market. Parts for repair of your older machine could face the same hurdles. Many gadgets and notions are made in China and may have higher prices, too.

I don’t have the answers on this, but I advise you to pay attention. Some retailers, including JoAnn Fabrics and Dharma Trading Co. have already notified customers that tariffs may affect pricing.

Here are the two articles I saw yesterday. One is from craft industry expert and reporter, Abby Glassenberg. Mostly, it explains that she is researching the issue and will be reporting on it soon. Sign up for her newsletter for notification on this concern, as well as other great stuff on the craft world.

https://whileshenaps.com/2018/08/on-embracing-the-unknown.html

The other item was from Quartz. It gives another brief summary of the upcoming changes.

https://qz.com/1365978/the-all-american-pastime-of-quilting-is-being-tucked-into-the-trade-war/

Updated to include a link to this article in Bloomberg:

https://www.bloomberg.com/news/articles/2018-08-21/retailer-joann-calls-on-crafters-to-oppose-trump-s-tariffs

Update 2: As said below in comments, ‘My post is NOT about the politics of this, from either side. As I mentioned, there are economic arguments in both directions. And this is not a question or post about “is it worth it.” It is ONLY to let people know this is an issue they should be aware of. If there are more comments on the politics of it, I will delete them.’ I have very strong opinions on the politics of this. As a retired investment professional with degrees in finance and economics, and many years experience in the field, I also know a few things about the economics of it. I WILL NOT DEBATE those issues here, and I will not allow for others to do so, either. That, again, is NOT the point of the post. Thanks for your respect on this.

Expect to see more on this soon. If enacted, these tariffs have the potential of affecting every part of the quilting industry.