Post and Courier
November 10, 2024
SC Ports users making tariff contingencies while consumers prepare to foot the bill
It’s like 2018 all over again, and businesses that import goods through the Port of Charleston are making contingency plans.
“We have been planning for this possibility since the spring,” Mike Creedon, CEO of Dollar Tree Inc., said of the prospect of new tariffs on imported goods when President-elect Donald Trump moves into the White House in January.
The discount retailer imports merchandise from China and operates a 1.5 million-square-foot Spartanburg County distribution center in Cowpens.
“In the event of any meaningful change to the current tariff regime, we have longstanding contingency plans to diversify our supply chain in a timely and cost-effective manner,” Creedon said during an earnings call with analysts. “We also have the flexibility to adjust product specs and price points to address any changes in the market.”
It was 2018 when then-President Trump kicked off a trade war with China, imposing billions of dollars in tariffs on clothing, electronics, plastics and a long list of other products shipped from the world’s second-largest economy. The higher import fees were met with dire predictions that they would harm U.S. businesses and consumers, forcing them to pay hundreds of dollars more each year for the goods they use in everyday life.
Many businesses, especially bigger ones with sophisticated and nimble supply chains, seem to have learned from the 2018 tariffs and have measures in place to deal with them.
“Our global manufacturing and supply chain footprint allows us to adapt to any macro political situation,” said Steven Richman, the CEO of power tool maker Techtronic Industries, which ships brands like Milwaukee and Ryobi through Charleston to a distribution center in Anderson.
Richman told analysts the company could simply shift production to another country if Trump targets Chinese factories.
Trade-offs?
Smaller manufacturers might not have that luxury.
“Small businesses are very competitive, and they may not be able to pass those higher costs on to consumers,” said Frank Knapp, president and CEO of the S.C. Small Business Chamber of Commerce. “So, they’ll have to find somewhere else to trim costs. It might be layoffs. It might be cutting health care or some other benefits. It could be devastating for some businesses.”
The tariffs imposed six years ago resulted in a reduction of Chinese imports, with the trade deficit narrowing from a record $419 billion in 2018 to roughly $311 billion by 2020. They were so successful in that regard that President Joe Biden retained most of them — and added more — when he took office.
But instead of China footing the bill, Americans paid for the tariffs with higher prices. The nonpartisan Tax Foundation estimates the tariffs of 2018-19 amounted to a $625 annual increase in household expenses.
“We’re not going to be getting a check from China for the tariffs,” Knapp said.
Economists and trade groups are warning consumers will take a bigger hit — the Tax Foundation pegged the annual cost at as much as $2,045 per household — if Trump follows through on his plan to impose tariffs of up to 20 percent on all imports and 60 percent on Chinese goods.
“American consumers could lose between $46 billion and $78 billion in spending power each year if new tariffs on imports to the United States are implemented,” the National Retail Federation said last week, citing a report by research group Trade Partnership Worldwide.
The report projected prices for imported toys and household appliances would see the biggest spikes, at nearly 56 percent and 31 percent, respectively, under a 20 percent tariff on all imports. Footwear prices would jump nearly 29 percent. Apparel would see a 20.6 percent bump while furniture would cost an additional 9.5 percent
All of those are among the top import commodities moving through the Port of Charleston.
“A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter,” said Jonathan Gold, the retail federation’s vice president of supply chain and customs policy. “This tax ultimately comes out of consumers’ pockets through higher prices.”
Auto focus
Automotive manufacturers, especially those focusing on electric vehicle production, could shoulder the largest tariffs. Trump has repeatedly warned he will impose duties of 200 percent or more on some foreign automobile imports.
Volvo Cars, which builds the battery-powered EX90 sport-utility vehicle at a $1.2 billion factory in Ridgeville, declined to comment on the impact tariffs might have on the company, which is based in Sweden and majority owned by China’s Geely Holding Group.
German automaker BMW has downplayed the impact higher tariffs might have, saying there’s plenty of capacity at its Greer plant to build vehicles for the U.S. market if duties make overseas imports too costly. The Upstate plant produced nearly 411,000 vehicles in 2023 and shipped more than half of them to overseas markets. Those exports could be reduced to make room for increased local sales.
“There’s some natural cover-up against possible tariffs,” BMW CEO Oliver Zipse told analysts last week. “In this respect, we shouldn’t be too nervous about what might happen.”
Such a move could hurt the Port of Charleston, which exports most of the X-model SUVs the carmaker builds in Spartanburg County.
Walmart — which operates a 3 million-square-foot import distribution center in Dorchester County — is bringing in fewer imports for the holiday, but not because of any worries over tariffs. Instead, the retail behemoth has too many holiday-related goods in stock and doesn’t need to fill its shelves any further ahead of Thanksgiving and Christmas.
John Rainey, Walmart’s chief financial officer, told analysts the retailer “feels good about what we can control” with tariffs and world trade.
“Good thing about elections is they come along every four years, and we get to have a lot of history with seeing the impact of that,” he said.
Perhaps the most candid outlook is from Philip Daniele, CEO of retailer AutoZone, which imports car parts through Charleston’s port.
“If we get tariffs, we will pass those tariff costs back to the consumer and we’ll pass them through,” Daniele told analysts in September.