Wiggle room: Crane operators and truckers moving containers at a port in Shanghai. Customers are seeking to ramp up shipments during the 90-day reprieve following the US-China tariff deal announcement. — AFP
LOS ANGELES: It may only be a 90-day reprieve from the steepest of Trump’s China tariffs, but it’s enough time to entice companies to restart factory operations and start shipping.
Therabody, a Los Angeles-based maker of wellness products such as Theragun massagers, restarted manufacturing and is ramping up production again in China, chief executive officer (CEO) Monty Sharma said.
He added that “in my 40 years of work,” he’s never been happier “about a 30% increase in our costs”.
Getting up and running again won’t be straightforward. Sellers of imports from China are facing risks such as a sudden surge of shipping demand that’s expected to raise costs and create delays.
On top of this, the relatively short 90-day window in which tariffs are being lowered doesn’t give companies a lot of wiggle room when it comes to trans-oceanic supply chains.
Bogg Bag, a company known for its perforated tote bags, has reversed an earlier decision to raise prices and will instead keep them the same, at least for now.
The company has also resumed production that was halted earlier this year.
However, Bogg is planning to cut its fall and holiday product lineup by 45 items – or almost half of its collection – so that it doesn’t have to rush production to make up for lost time.
Additionally, Bogg wants to move quickly to get products out.
“Let’s get them finished, let’s get them loaded and on the water,” said Bogg’s CEO and founder Kim Vaccarella, because ports will begin to get crowded.
Tariffs had eroded demand to the point that shipping company Evergreen Marine Corp last week told the Massachusetts Port Authority that its vessels departing from China would be stopping at the Port of Boston twice a month going forward, down from once a week, according to Richard Davey, CEO of the infrastructure operator.
But come Monday morning, the port operator was hearing from customers seeking to ramp up imports during the 90-day period, Davey said.
The Port of Boston’s biggest commodities include furniture, wine and spirits, toys, apparel and plastics.
The temporary tariff relief means that US companies will try to quickly ship out products that were being held in factory warehouses in China, according to David Chitayat, CEO of Genimex, which does contract manufacturing for global brands.
Many businesses will probably try to stock up on their products in the United States to have a cushion of inventory in case trade talks break down or levies spike back up after the 90-day period.
Some of those goods will still need to be produced, since some manufacturing was paused during the surge in tariffs.
Chitayat predicted companies will be able to absorb the tariffs at their current level, but consumers will still face higher prices.
“The tariffs are still meaningful, but should be manageable for most brands,” he said, assuming companies hike prices.
A 30% increase in manufacturing costs translates to roughly a 5% to 10% increase in the price consumers pay for the product, he added.
Companies still face hurdles to quickly ship their products to the United States during the 90-day window.
In the short term, shipping is “going to be a mess with everyone scrambling to get space,” Chitayat said.
He expects container prices to go up but notes they are starting from a low point.
Tarptent, a California-based seller of outdoor gear, which had previously asked its Hong Kong-headquartered supplier to pause purchase orders from its factory in China, is now exploring whether its orders can be resumed.
The company is also gauging whether there’s enough time to order and ship the US-made fabric it uses for its tents to the manufacturer in time for a production run to happen within the 90-day reprieve window in which the countries are engaged in talks. — Bloomberg
