GUEST EDITORIAL | TARIFFS ARE ABOUT TO GET REAL

…it’s about to get real…

At Rothmans, we just received our first tariff surcharge on an incoming clothing order from China. Yes, we buy from beautiful luxury brands like Canali, Corneliani and Santoni from Italy, but our opening price, more affordable options, are imported from faraway places with more efficient and lower cost factories. We like outfitting ALL men regardless of their budget, so we carefully curate, and often help design, lower cost alternatives. It is not only a good business, but a very satisfying one. 

So in the case mentioned above, a father/son duo designs really cool menswear and has it made in China. To bring it in, they now pay 147% duty as the goods cross the border. They have offered to split the difference with us, hitting Rothmans with a 75% tariff surcharge on our invoice. So an item that cost us $100, will now be $175.  If you prefer to think in retail terms, a jacket that you paid $400 for, will now be out at $750. 

Yes, prices are going up. 

My Conservative friends will say it is a short term problem that will correct itself over time as unencumbered American capitalism, now with an even playing field, will build and re-start factories. This is the beginning of a new dawn of American manufacturing. Our rusted out industrial cities will come back to life and we will see a re-emergence of American prosperity.  The money collected by tariffs will ultimately make income taxes unnecessary, leading to a spending boom. 

My more Liberal friends will say that tariffs are a regressive tax which impacts low income people in a much more hurtful way. They also question whether we have the workforce that is interested in doing factory work to fuel this supposed American re-industrialization. 

You can pick your side. Here is what I know:

-A tariff is an import tax. It is not “paid by China”.  It is paid by my supplier, passed on to me, then passed on to the consumer. I will definitely consider posting the tariff surcharge on some items to explain the sudden jump in price.  People should know the truth. It is not that we are just getting greedy and raising our prices.  

-Prices are going up because of this, and no matter the ultimate resolution of the trade war. Prices are sticky on the upside.

-This is going to put a lot of people out of business.  At Rothmans, we have close to 100 suppliers from all over the world. Tariffs will hurt us, but we will survive. We have enough diversity in our supply chain.  Small businesses, no matter which industry, might be tied to only one country.  If it is China, they are in trouble. 

-Whether or not you are in favor of tariffs, the roll out strategy has been far too haphazard.  As a small business owner, I am always looking to the future. Uncertainty is the enemy of projections. Projections are the beating heart of investment in your business.  Most of my business owner colleagues have slowed their roll, waiting for some clarity. Deals are at standstill. The on again, off again, 90 day reprieve game, is an unfortunate policy.  We need clarity, whether it takes a form that we like or not. 

I am by nature an optimist. It is probably what it takes to survive for over 30 years as a NYC retailer.  America will get through this. To me, the takeaway is that we need to stay engaged in politics.  Understand the implication of policies, and hold our public officials to demanding and high standards. That is what we can learn from this experience.